Against one’s own theses? – JPMorgan now advises Bitcoin as a hedge after all
A 1 per cent allocation to bitcoin would bring „efficiency benefits“ to many portfolios.
Two analysts at the major Wall Street bank believe that an investment in Bitcoin is a good hedge for many portfolios against the fluctuations in traditional asset classes such as stocks, bonds and commodities.
Accordingly, a small investment of 1% of the size of the respective portfolio would be advisable, again in order not to expose oneself too much to Bitcoin’s fluctuations in value. After the market-leading Bitcoin Revival cryptocurrency reached its new current record high of 58,000 US dollars on 21 February, it subsequently fell again by 20 %. Overall, Bitcoin is nevertheless up 60% since the beginning of the year.
As Bloomberg reports, JPM analysts Joyce Chang and Amy Ho explain in a circular to the bank’s clients to this effect:
„In a multi-dimensional portfolio, investors should allocate up to 1% of the portfolio’s largest to cryptocurrencies for efficiency benefits.“
In praising Bitcoin, the big bank is joining a tenor led by major investors such as Paul Tudor Jones, Stan Druckenmiller, Tesla and MicroStrategy. Even the New York bank BNY Mellon, the oldest bank in the US, wants to offer custody services for cryptocurrencies in the future.
The analysts point out that cryptocurrencies should be understood as investment products, not currencies like the US dollar or the euro. Either way, their recommendation contradicts previous criticism of Bitcoin from within the firm.
Two of their JPM colleagues had called the crypto market leader the „worst hedge for the equity market“ this month
Yet Bitcoin could benefit enormously from even „small“ amounts of investment, because as Ark Investment Management’s Cathie Wood calculated to CNBC on 17 February, if each major corporation alone converted just under 10% of its own cash reserves into Bitcoin, the cryptocurrency’s price would rise to $200,000.
In the new year, interest in Bitcoin investments is as high as it has rarely been before, although this does not only apply to companies and large investors. As the trading platform Robinhood states, it has already recorded 6 million new crypto users in the first two months, which is a significant increase on the previous year.
Further evidence that retail investor interest remains high at the moment, although the record run is starting to wane. At the time of going to press, Bitcoin has lost just under 7 % in the last 24 hours and stands at 47,100 US dollars.