JPMorgan likes the idea of investors using Bitcoin as a way to diversify their portfolios. The investment firm strategists suggested that 1% portfolio allocation to Bitcoin would serve as a hedge against fluctuations in traditional asset classes such as stocks, bonds, and commodities.
JPMorgan does not yet recommend large bets on Bitcoin, but the firm has written that it is possible to buy a relatively small amount that will not greatly affect the portfolio, even if the price drops significantly.
“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,” strategists including Joyce Chang and Amy Ho wrote in a note Wednesday, Bloomberg reports.
This endorsement comes amid massive investments in Bitcoin by Tesla, MicroStrategy, Paul Tudor Jones, and Stan Druckenmiller. The report added that BNY Mellon (Bank of New York Mellon Corporation) has also announced plans to hold, transfer, and issue the digital asset for its clients.
JPMorgan analysts emphasized that crypto assets should be viewed as investment vehicles and not financing currencies like the US dollar. “Cryptocurrencies are investment vehicles and not funding currencies,” the strategists said. “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.”
Cryptocurrency purchases skyrocketed in 2021. Marketplace Robinhood reported that about six million new users bought cryptocurrency on the platform in the first two months of this year.
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.