After JPMorgan said that cryptocurrencies are “the worst hedge for major drawdowns in stocks with questionable diversification advantages,” investors can invest 1% of their portfolio in cryptocurrencies. This can help “add an efficiency gain to the portfolio’s total risk-adjusted returns,” said the company’s strategists.
Investors can allocate 1% of the portfolios to Bitcoin, JPMorgan says
JPMorgan Chase now sees benefits in adding a small percentage of Bitcoin to a multi-asset portfolio. The company’s global research director Joyce Chang and Amy Ho, vice president of strategic research, wrote in a statement to customers on Wednesday:
In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies for an efficiency gain in the portfolio’s total risk-adjusted returns.
However, the strategists made it clear: “Cryptocurrencies are investment instruments and do not finance currencies. So if you want to hedge a macro event with a currency, we recommend hedging by funding currencies like the yen or the US dollar. “
While many analysts believe Bitcoin is a way to hedge against significant swings in traditional asset classes like stocks, bonds, and commodities, JPMorgan has doubts. Just last week, the investment bank claimed that bitcoin was an “economic side effect,” adding:
Crypto assets remain the worst hedge for major drawdowns in stocks with questionable diversification advantages at prices well above the cost of production, while correlations with cyclical assets increase with the mainstreaming of crypto ownership.
JP Morgan also said recent Bitcoin prices are well above the cryptocurrency’s fair value estimates. The company went on to claim that mainstream adoption increases Bitcoin’s correlation with cyclical assets that rise and fall with economic changes. This reduces the benefits of Bitcoin in diversifying portfolios. However, its most recent report recommends that investors be able to add a small percentage of Bitcoin to their portfolios.
The investment bank has come a long way since its CEO Jamie Dimon described the cryptocurrency as a scam back in September 2017. Earlier this month, JPMorgan co-president Daniel Pinto said he was certain that the demand for Bitcoin “will be [there] Sometime. “The board confirmed,” If over time an asset class develops that is used by various asset managers and investors, we need to get involved. “In addition, the company’s analysts have predicted that Bitcoin price could reach $ 146,000 since the competition of the cryptocurrency with gold intensifies.
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