At least one major investment bank isn’t bullish on Bitcoin these days. On Tuesday, excerpts from an investor’s note written by JP Morgan’s foreign exchange strategist John Normand were published, and the remarks argue that Bitcoin is “vastly inferior” to fiat currency.

JP Morgan did not respond to Ars’ repeated requests to see the entire investor’s note.

According to Barron’s published excerpts, Normand writes that, as a medium of exchange, Bitcoin performs "no worse" than using the US dollar or another currency like it.

But Bitcoin’s other two functions as a currency preclude it from being a serious contender in global exchanges. Those two functions include existing as a common power (the US dollar has a common power being that it's the only currency that the Internal Revenue Service will let you pay your taxes in) and standing as “a unit of account and store of value” (Normand says Bitcoin “falls well short” in this respect due to its extreme volatility). Bitcoin's “transactional use will always be limited unless it performs the other two functions of money better than a fiat currency,” Normand concluded.

As highlighted earlier in chart 2, Bitcoin’s realized volatility has averaged 120 percent over the past three years, with a range of 50 percent to 400 percent. By comparison, typical G10 currency volatility is eight percent with a range of seven percent to 16 percent over the past three years. Typical emerging markets FX volatility is about nine percent with a range of seven percent to 20 percent over the past three years. Even during periods of extreme financial market stress such as the Asian Crisis of 1997/98 and the Argentine Default of 2002, currency volatility reached levels closer to 50 percent (Asia) or 120 percent (Argentina), and then only persisted for a few weeks. True, these swings may represent simply normal volatility for a start-up currency just like the fluctuations of start-up companies’ share prices during the 1990s. Even by dot-com standards, however, these moves are brutal. The Nasdaq only quintupled in value in three years (1997-2000), while Bitcoin’s price has risen 50-fold in the past year …. Such price fluctuations make it impossible to seriously consider bitcoin as a unit of account or store of value for a material amount of corporate or investor exposure.

Further, Normand cites what is perhaps Bitcoin’s greatest asset and simultaneously its greatest liability: it has no central authority.

He writes:

In exchange for its low-cost peer-to-peer system, Bitcoin’s network contains no recourse if bitcoins are lost or hacked. At least traditional fee-charging banks provide deposit insurance and other fall-backs. With fixed supply, Bitcoin’s deflationary bias should also be clear. That quality serves owners well when exchanging into foreign currency, but it would be onerous for any economy operating with it as legal tender. Indeed Weimar Germany was unpleasant, but so was the Great Depression.

With recent attacks against the Bitcoin infrastructure, is it any wonder that the exchange rate continues to fall?