Financial services giant JPMorgan Chase said it was cautious on real estate in a note to investors this week and replaced real estate with cryptocurrency as its preferred alternative asset.

The move comes as rising interest rates put upward pressure on commercial real estate cap rates and near-term choppiness emerges in investment markets as both buyers and sellers adjust their expectations, Wealth Management reports. Other pressures on CRE values include higher construction costs and more fundamental questions about how assets are valued.

“A potential lagged repricing keeps us more cautious on private equity, private debt and real estate over the coming quarters,” bank analysts wrote in a widely reported note to investors on Wednesday. “We thus replace real estate with digital assets as our preferred alternative asset class along with hedge funds.”

The JPMorgan analysts, led by Managing Director Nikolaos Panigirtzoglou, also said that bitcoin is undervalued, asserting that fair value for that particular cryptocurrency remained unchanged at roughly $38K each. As of Thursday, bitcoin was trading at about $29,200, and its value to the dollar has dropped about 25% over the last year.

“The past month's crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for Bitcoin and crypto markets more generally," the analysts wrote.

Alternative asset classes generally aren’t equities or cash, differing from traditional investment types because they aren’t easily sold or converted into cash, according to the Harvard Business Review. Alternative assets also tend to have a low correlation to standard asset classes, meaning they often don’t move in the same direction as more traditional assets in response to macroeconomic trends.

Real estate has long been a recognized alternative asset class, along with the likes of commodities, collectibles, hedge funds, and private equity and debt.

In 2021, the bank created its own crypto, JPM Coin, which it said is a “shared ledger system that serves as a payment rail and deposit account ledger, enabling participating J.P. Morgan clients to transfer US dollars held on deposit with J.P. Morgan.”

More recently, JPMorgan made an investment in blockchain intelligence company TRM Labs, which specializes in crypto compliance and risk management tech. The bank also unveiled a virtual lounge in blockchain-based world Decentraland in February, asserting in a report that the metaverse has a market opportunity of $1T in yearly revenue.