According to JP Morgan analysts, the recent Bitcoin fall was not caused by El Salvador legalising Bitcoin. According to them, the issue was more about too much market froth. Additionally, they stated that Bitcoin is unlikely to supplant the currency.

Business Insider released a piece today about El Salvador's launch of Bitcoin as a dual national currency alongside the US dollar. The story reports that the roll-out was met with "protests" and "technical issues."

JP Morgan analysts dubbed the roll-out a "hurried mandate," referring no doubt to President Bukele's enthusiasm for his country to adopt the world's most popular cryptocurrency.

According to the analysts:

"El Salvador's ill-fated attempt should not be viewed as a watershed moment for bitcoin or other cryptocurrencies. This week's crypto markets were harmed by El Salvador's difficulties, but it was against a bullish backdrop."

This type of remark is typical of every traditional banking institution, and the largest bank in the United States is no different.

The analysts then proceeded to explain why Bitcoin has no chance against the dollar, citing Bitcoin's significant volatility as a justification for its unsuitability.

"Very few goods or services are priced or bargained in bitcoin terms, and bitcoin is priced in dollars," the analysts wrote. "While retailers and merchants in El Salvador will eventually accept and publish prices in bitcoin, these prices are anticipated to fluctuate dramatically in response to the dollar value of bitcoin."

Additionally, the analysts stated that the fixed Bitcoin supply of 21 million coins will create a deflationary environment that is "unsustainable" for the majority of economies.

"Given bitcoin's limited supply, its purchasing power would naturally increase over time, lowering the price of goods and services denominated in bitcoin. Economic agents would consequently be motivated to hoard currency rather than use it in such an economy."

It begs the question, then, whether these same analysts would much prefer the existing inflationary system, in which the purchasing value of your currency is eroding at an ever-increasing rate as inflation rises?

The JP researchers identified two additional points of contention. The first was that the Strike payments network, which is built on top of the lightning network, may pose a security and privacy concern.

The other point of contention was the $150 million government Bitcoin trust, which analysts believe may be insufficient if El Salvadoreans chose to sell their Bitcoin in bulk.

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