Finance house analysts have made an extensive statement on how to hedge investment returns. According to a recent memo by the team financial analysts representing JP Morgan, the current status of Bitcoin functions as an uncorrelated uncorrelated asset in a wider market. Investment in cryptocurrencies finally recognized as “right”.
Investment in cryptocurrencies recommended
“In a multi-asset portfolio, investors can allocate 1% of their funds to cryptocurrencies to increase efficiency,” said analysts, a team consisting of Joyce Chang and Amy Ho.
After growing at least five times over the past year, Bitcoin has prompted prominent investors such as Elon Musk, Paul Tudor Jones, and Stan Druckenmiller to play their part. Companies like MicroStrategy and BNY Mellon have also revealed their positions in BTC. The average number of active cryptocurrency users has also increased significantly since December 2020. We are talking about about 15 million new investors.
Bitcoin and stocks
Strategists often refer to Bitcoin as a viable hedge against significant fluctuations. The ones typically seen in traditional asset class charts. The 1% allocation recommendation is based on observations of a very volatile cryptocurrency market. The point is that even in the event of a sudden transition to a downtrend, the effect would be negligible for an investor’s entire portfolio.
“Due to unmet buyers pressure from publicly traded funds, closed-end funds, and large public corporations adding Bitcoin to their positions, cryptocurrency demand far exceeds its supply,” said Annabelle Huang, partner at Amber Group.
It is worth noting that during the market crash of March 2020, the cryptocurrency markets also suffered (along with traditional markets). The sharp drop closed BTC prices as high as $ 5,000. The correlation of the cryptocurrency market with the S&P 500 index increased at that time to 0.54 (from 0.13). This suggests that both markets, while nominally unrelated, are to some extent correlated.
Despite these positive opinions, analysts at JP Morgan still doubt the usefulness of cryptocurrencies. They claim that cryptocurrencies are investment instruments, not currencies.