Since 2021 began, the crypto market is up 100%. Many important companies from around the globe have invested in crypto in order to diversify their investment portfolios. JP Morgan is one of the largest investment banks on the planet and supports crypto – it recently declared in a market research note that investors should allocate 1% of their portfolios to digital assets.
Among those strategists are Joyce Chang and Amy Ho who believe that crypto assets are “investment vehicles, not funding currencies.”
Bitcoin started 2021 with a price close to $29,000 and has recently reached its ATH of $58,000. On February the 20th, the total market cap for BTC has passed $1 trillion. Things took a wrong turn as a result of heavy selling pressure from retail traders, which sent BTC crashing by 20%.
“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 research note mentions.
The strategist for JP Morgan, Nikolaos Panigirtzoglou, said in a recent research note that Bitcoin was going through a liquidity crisis and that its volatility represented a big concern for retail and institutional investors. Chang and Ho mention that cryptos have limits in regards to their usefulness.
“Cryptocurrencies are investment vehicles and not funding currencies. 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,” they’ve concluded.