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In an article in the Journal of Payments and Securities Regulation, JPMorgan says crypto coins “rank as a poor hedge for major drawdowns in equities, with inconclusive diversification benefits.” A portfolio allocated to bitcoin can benefit from efficiency gains in the overall risk-adjusted returns, say JPMorgan Chase strategists.Investors can allocate 1% of their portfolios to bitcoin, JPMorgan claims.
Investors Can Allocate 1% of Portfolios to Bitcoin, Says JPMorgan
JPMorgan As a consequence, whenever economic events are of economic significance, we advise hedges in the form of funds in currencies such as the yen or U.S. dollar instead.” Most analysts believe that bitcoin will allow investors to secure themselves from significant fluctuations in their traditional asset classes, including bonds and commodities, but JPMorgan has doubts.
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.
JP Morgan also stated that bitcoin prices are currently well above their fair value estimates. Bitcoin's correlation with cyclical assets, which fluctuate with economic change, is further increased by mainstream adoption.
By eliminating bitcoin’s benefits of diversifying portfolios, it reduces the benefits of hedging. Yet, its most recent report suggests that investors add a small percentage of bitcoin to their portfolio. That's big progress from the day the investment bank's CEO said the cryptocurrency was a fraud in September 2017.
Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed.
The executive affirmed: “We will have to be associated with any emerging asset class that is to be used by various asset managers and investors.” Additionally, analysts of the firm have predicted that bitcoin could reach $146,000 as the cryptocurrency's competition with gold heats up. How do you view JPMorgan's outlook on bitcoin? In the comments below, let us know your thoughts. ??
The investment bank has come a long way since its CEO Jamie Dimon called the cryptocurrency a fraud back in September 2017. The information in this article is provided solely for informational purposes. The blog is not intended to solicit any offers or solicitations to buy or sell, or to recommend or endorse any products, services, or companies. Moreover, the firm’s analysts have predicted that bitcoin’s price could reach $146,000 as the cryptocurrency’s competition with gold heats up.
Neither the company nor the author is liable for any damages or losses directly or indirectly caused or alleged to be caused by use of or reliance on information, products, or services described in this article. Read our disclaimerShow comments .
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Disclaimer: When hedging a macro event, we recommend funding currencies like the yen or dollar instead. While many analysts believe that bitcoin is a way to hedge against significant volatility in traditional asset classes such as stocks, bonds, and commodities, JPMorgan has doubts. Bitcoin.com does not provide investment, tax, legal, or accounting advice. JP Morgan also said recent Bitcoin prices were well above its fair value estimates.
