Strategists have confirmed that cryptocurrencies are a great hedge against major trade class asset shifts, and JP Morgan disagrees.
The firm had stated that they view cryptocurrencies as the “poorest hedge for major drawdowns in equities, with questionable diversification benefits,” yet says that investors could put 1% of portfolios in crypto.
They extensively added that cryptos could “achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.”
JP Morgan Chase has already taken a step towards crypto adoption and is already seeing the gains from investing a small percentage of a multi-asset portfolio into bitcoin.
Joyce Chang and Amy Ho of JP Morgan state to clients that;
“In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.”
In my opinion, this falters as to how the firm views cryptocurrencies. Cryptocurrencies are investment assets and not funding currencies.
“Cryptocurrencies are investment vehicles and not funding currencies. So when looking to hedge a macro event with a currency, we recommend a hedge through funding currencies like the yen or U.S. dollar instead.”
The firm also targets crypto’s volatility. They state that mainstream acceptance of cryptocurrencies will improve Bitcoin’s similarities with traditional assets.
As stated below, a comparison of Bitcoin with S&P 500 indicates high correlations in sell outs since the beginning of last year;
https://d1-invdn-com.akamaized.net/content/pic4094916105ed15c0aafaddf91bbb17a7.png
Furthermore, the firm believes that this will be subject to economic shifts, rising and falling accordingly. They see this as a disadvantage for long-term investments and are against putting larger percentages in crypto currencies.
The executive at the firm further said that; “If over time an asset class develops that is going to be used by different asset managers and investors, we will have to be involved.”
I think that this statement could mean that JP Morgan will more than likely one day announce future investments of larger percentages of their portfolio in cryptocurrencies.
Furthermore, strategists from JP Morgan suggest that with current competitions with Gold, Bitcoin could reach a massive $146,000.
A great prediction if you ask me and maybe a game-changer for JP Morgan’s views on cryptocurrencies in the future.
