Per a report published by Bloomberg earlier today, on Wednesday (February 24), Joyce Chang, Global Head of Research at J.P. Morgan, talked about cryptocurrencies in a note to clients.
Her bio at the Asian American Business Roundtable’s website says that from 1997 through 2012, Chang “held top rankings in Institutional Investor’s Fixed-Income Research surveys for Emerging Markets research, including the distinction of earning 25 #1 individual rankings,” and in 2014, she was “inducted into the Fixed Income Analyst Society Hall of Fame.” Before joining J.P. Morgan in 1999, Chang was “a Managing Director for a decade at Merrill Lynch and Salomon Brothers.”
Bloomberg says that with regard to the role of crypto as part of a balanced portfolio, Chang wrote:
“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.“
Annabelle Huang, a partner at Amber Group, a leading crypto finance service provider, told Bloomberg:
“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.“
One word of caution offered by the JP. Morgan report was this one:
“Cryptocurrencies are investment vehicles and not funding currencies. So when looking to hedge a macro event with a currency, we recommend a hedge through funding currencies like the yen or U.S. dollar instead.“
On February 16, a team of J.P. Morgan global market strategists led by Nikolaos Panigirtzoglou wrote about Bitcoin in the weekly publication “Flows & Liquidity”, which is one of J.P. Morgan’s flagship publications.
Dr. Panigirtzoglou is a Managing Director at J.P. Morgan who works on Global Market Strategy. Before joining J.P. Morgan in 2004, he worked as a Financial Economist at the Bank of England. Dr. Panigirtzoglou holds a PhD in Finance from Queen Mary University of London, an MSc in Economics from London School of Economics, and MSc in Economics and Finance from Warwick Business School.
With regard to Bitcoin, the J.P. Morgan strategists wrote:
“Since the end of September the market cap of bitcoin has grown by $700bn, from $200bn on Sep 30th to $900bn currently… What has been remarkable over the past five months is that the $700bn increase in the market cap of bitcoin has taken place with relatively little institutional flows…
“How is it possible that such a limited flow would result in the magnitude of the increase in bitcoin market cap? One possibility is that, given the increase in interest from real money investors, and speculative investors seeking to frontrun it, this limited flow is hitting a relatively inelastic supply of a predetermined increase in new bitcoins mined and having to offer a premium to get existing holders to part with their bitcoin holdings. A second possibility is that retail inflows have significantly magnified the institutional flow.“
Back on January 4, according to Bloomberg, the same team of global market strategists, offered this long-term price target for Bitcoin:
“A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term… a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.”
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.