With the pandemic boosting demand for alternative assets, J.P. Morgan Securities' Joyce Chang is seeing a new dynamic unfolding in the cryptocurrency space: a battle between banks and fintech.
"Fintech is coming into the mainstream from this pandemic as there has really been demand for digital services — less in person transactions," the firm's chair of global research told CNBC's "Trading Nation" on Thursday.
The activity is playing out as bitcoin, the predominant cryptocurrency, is taking Wall Street on a wild ride. Bitcoin is up about 66% this year and 452% over the last 12 months.
"We've seen demand from millennials," Chang said. "We've seen demand from institutional investors for the first time, as well."
In a research note last week, Chang wrote along with colleague Amy Ho that investors could consider owning up to 1% of bitcoin in a multiasset portfolio.
However, she finds near-term issues connected to cryptocurrencies' popularity.
"We also are concerned about valuations here," said Chang. "We've seen that just $11 billion of inflows since last September, which is a high number for bitcoin, has increased the market cap by $700 billion."
She believes demand for alternatives to traditional investments will continue, but her forecast comes with a caveat.
"Right now during a major equity drawdown, we have not seen that it has been an effective hedge," Chang said.
On Thursday, bitcoin failed to grab gains as the major stock market indexes tumbled. The cryptocurrency also got hit, falling more than 5%.