3 months ago 2 min read

JPMorgan: Major Investment Firms Cannot Use Cryptocurrencies as an Asset Class


Key Ideas

  • It's difficult because of the extreme volatility and the absence of an intrinsic return.
  • Bitcoin has not been proven to be a safe haven asset or digital gold.
  • Institutional customers can obtain cryptocurrency goods and services from numerous banks and financial institutions.

According to a strategist at major investment bank JPMorgan, the majority of large institutional investors hardly even consider cryptocurrency as an asset class. It's challenging because there isn't an intrinsic return that investors can point to and the volatility is too high.

Jared Gross, the head of institutional portfolio management at JPMorgan Asset Management, spoke about cryptocurrencies and the interest that institutions have shown in this asset class. The head investment strategist at JPMorgan claims that the majority of large institutional investors have virtually little exposure to bitcoin as an asset class. The volatility is too high, and the lack of an intrinsic return to point makes it difficult.

Gross continued by asserting that it is "self-evident" that bitcoin has not fulfilled expectations of being a form of digital gold or haven asset. The majority of institutional investors, he continued, are probably exhaling in relief right now that they avoided that market and are not going to do so any time soon.

As the Federal Reserve and other significant central banks across the world raised interest rates in an effort to fight inflation, the cryptocurrency market crashed this year. Additionally, there have been failures and bankruptcies in the industry, most recently the cryptocurrency exchange FTX.

Banks and other financial institutions are increasingly offering crypto products and services to institutional clientele. In September, State Street predicted that institutional investors would keep looking for crypto assets. In a recent announcement, Nasdaq introduced "Nasdaq Digital Assets," citing increased demand from institutional investors.

Additionally, according to a Coinbase survey published in November, institutional investors increased their holdings throughout the crypto cold. The company stated that there is a clear indication that cryptocurrencies are acceptable as an asset class. 74% of institutional investors surveyed in a report by financial behemoth Fidelity in October said they planned to invest in digital assets.

See related arcticle here.

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