Strategists at Wall Street banking giant JPMorgan have suggested that an allocation of one percent of the portfolio to Bitcoin would hedge against fluctuations in traditional asset classes.such as stocks, bonds, and commodities.
An allocation of a small percentage is advised to mitigate the risk of large drops in the value of the digital asset. Bitcoin is down 20% from its all-time high of over $ 58,000 on February 21, but it is up 60% since the beginning of this year.
According to Bloomberg, JPM strategists Joyce Chang and Amy Ho stated in a note to clients:
“In a multi-asset portfolio, investors can probably add up to 1% of their allocation to cryptocurrencies to achieve any efficiency gains on the overall risk-adjusted earnings of the portfolio,”
Endorsement follows major Bitcoin investments by Paul Tudor Jones, Stan Druckenmiller, Tesla and MicroStrategy. The report adds that BNY Mellon (Bank of New York Mellon Corporation) has also announced plans to hold, transfer and issue the digital asset for its clients.
JPMorgan analysts added that crypto assets should be treated as investment vehicles and not as funding currencies like the dollar or yen.. The comments appear to contradict those made earlier this month by other strategists at the investment bank, who claimed that “crypto assets remain the worst hedge for big falls in equities.”
Speaking to CNBC on February 17, Cathie Wood of Ark Investment Management noted that if all companies put 10% of their cash in Bitcoin, $ 200,000 would be added to the price of the asset.
Cryptocurrency purchases have exploded in 2021, and it’s not just institutions that are charging. The trading company Robinhood has reported that some 6 million new users bought cryptocurrencies on the platform in the first two months of this year alone..
The figures have dwarfed those of the previous year, indicating that upward momentum from the retail sector remains strong despite the recent correction. At press time, BTC had fallen another 7% in the last 24 hours to trade at $ 47,100.