Strategists from JPMorgan Chase & Co have supported the narrative that investors should allocate1% of their portfolio in Bitcoin. The analysts have also thrown some light on the evaporating liquid supply as large institutions and corporations are buying digital assets in substantial quantities.
While there many interesting topics for discussion in the crypto industry, the hot topic is how big should be the percentage investors allocate to bitcoin. BTC maximalists express in the narrative that all eggs should be in one bitcoin basket. Very few outsiders in the crypto community suggested any BTC exposure until last year.
The first one to go public was the legendary legacy investor Paul Tudor Jones III which came after the COVID-19-induced market crash. Since then, many representatives of the traditional financial field have joined and JPMorgan is the latest one. As per the information from Bloomberg, they were a bit cautious but still insisted that investors should see Bitcoin as a possible hedge.
“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 analysts further advised that investors can explore many other fiat currencies such as the yen or the dollar. If they want to hedge a macro event and not cryptocurrencies they can do so as they are “investment vehicles and not funding currencies.”
Bitcoin’s Reducing Liquid Supply
JPM also added another topic that is BTC’s decreasing liquid supply. Since summer 2020, numerous giant names have joined the BTC craze. Microstrategy owns over 90,000 bitcoins, Grayscale is buying new coins setting new records, Tesla invested $1.5 billion in the asset, and various other institutions have bought in the cryptocurrency as well.
Additionally, the production rate of the newly-created bitcoins was halved in May 2020 which was the third-ever halving. The increased demand and decreased liquid supply have affected the digital asset price which was up by 50% since the start of the year.
JPM’s strategists concluded by saying that,
“Through the insatiable buy-side pressure from exchange-traded fund issuers, close-ended funds, and large public corporations adding Bitcoin to their positions, demand is massively outstripping supply.”