Did JPMorgan Just Become the Poster Boy for Bitcoin?

Ashna  |  Feb 27, 2021

From not being considered as a monetary asset at all to becoming a Trillion dollar masterpiece, the world’s largest cryptocurrency, Bitcoin, has really come a long way. And the 2021 surge in the digital asset’s value is proof enough. However, when it came to price, fluctuations came under the spotlight rather than the real issue at hand for which Bitcoin was actually built to address. Uncertainty and fear did drive the crypto market for a long time, however, the reputation has flipped for the better and with good reasons of course.  

A change of heart about Bitcoin would probably be an understatement when it comes to one of the leading banking and investment giants, JPMorgan Chase. According to Bloomberg, in a note to their clients, JPMorgan’s strategists Joyce Chang and Amy Ho have recommended their clients to allocate a small part of their investment into Bitcoin as a hedge against fluctuations in traditional assets.

“In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.”

Backed by some of the major Bitcoin investments including Tesla, Paul Tudor Jones, Stanley Druckenmiller, and MicroStrategy, the note to the investors heavily highlights JPMorgan’s increasing trust in cryptocurrencies. Hinting towards the escalating crypto adoption, the report went on to mention the increasing size of the Grayscale Bitcoin Trust and BNY Mellon’s plan to hold, transfer and issue the digital currency for its clients.

Bitcoin: Hedge Against Fluctuations

For the first time in history, cryptocurrencies have received such a concrete applaud by none other than JPMorgan Chase & Co. itself, especially with its history of openly bashing bitcoin. Now, the strategists at the firm have somewhat persisted on their clients to perceive cryptocurrencies as a hedge against significant fluctuations in traditional asset classes like stocks, bonds, and commodities. 

The banking giant’s idea floats towards investors’ benefits while diversifying their portfolio using Bitcoin. Since the recommended amount is merely 1% of the allocations, the investment won't cause any major hits even if the price of the asset goes down. Moreover, JPMorgan’s suggestion has brought one of the most heated topics of discussion in the community to light - how much should be allocated to bitcoin.

Where the strong-headed BTC following has previously inclined towards putting all their eggs into bitcoin, there were several others that leaned towards further diversification. However, the fact cannot be denied that until last year, the number of outsiders looking to gain exposure into the BTC market was quite low. But with the increasing crypto adoption along with rational thinking and justification, several financial leaders and institutions have joined and openly displayed their interest in the encrypted ecosystem.

Bitcoin’s Rocketing Demand & Decreasing Supply

Regardless of the very recent and groundbreaking correction, Bitcoin’s price is still up by 50% compared to the beginning of the year, clearly gesturing towards the unhazed demand of the asset, despite the dips. With over 18.6 million BTC already mined out of the very limited supply of 21 million, the surging demand is not exactly shocking to the community. 

Where the early adopters of the first-ever cryptocurrency were very familiar with the inevitable accounts of the BTC halving on the supply and demand of the asset, the sudden mass accumulation by the institutions only added to the gaining popularity. With JPMorgan as one of the newest proponents, the BTC craze spiraled among the giants, including the whopping 90,000 bitcoins owned by MicroStrategy and Tesla’s allocation of $1.5 billion in the digital asset to name a few. As the world comes to terms with the undeniable potential and benefits of cryptocurrencies, it's only a matter of speculation as to which financial or tech institution would be the next to follow suit.

Related News