JPMorgan has advised its clients to allocate 1% of their funds to Bitcoin as the cryptocurrency could be a potential hedge against fluctuations in traditional assets
Investment bank JPMorgan sent a note to its clients, advising them to allocate 1% of their portfolio to hedge against fluctuations in traditional assets. According to the bank, the Bitcoin allocation would help them overcome fluctuations in assets such as stocks, bonds and commodities.
JPMorgan strategists Joyce Chang and Amy Ho, in a note to their clients, said, “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”.
The endorsement came as the leading cryptocurrency lost more than 20% of its value since reaching an all-time high above $58,000 on February 21. Bitcoin is trading just above the $46,000 mark on most cryptocurrency exchanges, down by 8% over the past 24 hours.
According to a Bloomberg report, the Bank of New York Mellon Corporation (BNY Melon) also announced its plans to hold, transfer and issue Bitcoin on behalf of its clients.
The bank has long been touted to become one of the most prominent financial institutions to enter the cryptocurrency space. BNY Melon’s entry could make it easy for thousands of investors to access Bitcoin and a host of other cryptocurrencies they choose to offer.
The JPMorgan strategists advised their clients to treat Bitcoin and other cryptocurrencies as investment vehicles rather than funding currencies like the US Dollar (USD) or the Japanese Yen (JPY).
This recent advice by JPMorgan strategists contradicts the comments made by other analysts at the investment bank earlier this month. According to the analysts, cryptocurrencies remain one of the poorest hedges for major drawdowns in equities.
JPMorgan was previously critical of Bitcoin. However, the bank has changed its stance on the cryptocurrency in recent years. An increasing number of financial institutions and corporate entities are entering the cryptocurrency space.
Tesla, MicroStrategy, Square, Paul Tudor Jones and Stan Druckenmiller, are some of the leading corporate entities and investors to invest billions of dollars into the cryptocurrency market. Ark Investment Management’s Cathie Wood believes that Bitcoin’s price would increase by $200,000 if all corporations put 10% of their cash into the cryptocurrency.