Strategists at U.S. investment banking giant JPMorgan suggested that investors should consider allocating a small percentage of their portfolio to bitcoin. The strategists’ comments come amid an increase in bitcoin adoption by institutional investors.
Strategists Say Bitcoin is a Hedge
According to Bloomberg on Thursday (Feb. 25, 2021), strategists Joyce Chang and Amy Ho in a recent note to clients stated that investors should diversify their investment portfolio by including bitcoin. Chang and Ho in their note suggested that investors allocate one percent of their portfolio to bitcoin and other cryptocurrencies.
For the JPMorgan strategists, investing a percentage in bitcoin would serve as a hedge against fluctuations in traditional assets. The strategists added that crypto assets are investment vehicles, and not funding currencies. An excerpt from their note reads:
“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.”
Bitcoin’s price level since the start of 2021 has been on a bullish advance, rising over 80 percent to reach an all-time high of over $58,000. However, the BTC price suffered a retracement, sliding down to below $45,000. Although it witnessed a slight improvement, the flagship crypto is currently trading at around $47,000.
Bitcoin Price Could Hit Six Digits With Increased Institutional Investment
While bitcoin’s volatility has been a cause for concern for many investors, BTC price has skyrocketed mainly due to the influx of institutional investors. The past year saw big wigs like Microstrategy, Square, Ruffer Investment, among others, buy bitcoin.
The institutional interest in bitcoin has continued in 2021, with Elon Musk’s electric vehicle manufacturing company Tesla making a $1.5 billion BTC investment. Square and Microstrategy also made additional bitcoin purchases, with the latter making a billion dollar bitcoin investment.
Recently, New York-based asset manager Stone Ridge made a filing with the U.S. Securities and Exchange Commission (SEC) to make bitcoin its seventh investment strategy in its Stone Ridge Diversified Alternatives Fund. Excerpts from the document read:
“The Fund intends to gain exposure to the price of bitcoin by selling at-the-money or out-of-the-money exchange-traded cash-settled put options on bitcoin futures contracts. This means that the strike price of the put options the Fund sells will be at or below the current price of the underlying bitcoin futures contract when the options are sold.”
According to the filing, the addition would become effective on April 26, 2021. SkyBridge Capital’s founder Anthony Scaramucci called the development a “big deal”, adding that it would set a precedent for other mutual funds to add BTC.
Meanwhile, back in December 2020, another JPMorgan strategist Nikolaos Panigirtzoglou said that bitcoin could see an influx of $600 billion from institutional investors if insurance companies and pension funds from the U.S., the U.K., Europe, and Japan allocate one percent of their assets into BTC.
Also, Catherine Wood of Ark Investment recently stated in a CNBC interview that if all corporations allocated 10 percent of their cash to bitcoin, it could add $200,000 to the coin’s price.
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