The narrative that investors should allocate 1% of their portfolio in bitcoin as a hedge has received support from strategists representing the giant US multinational investment bank – JPMorgan Chase & Co.
The analysts also highlighted the evaporating liquid supply, as giant institutions and corporations are purchasing substantial quantities rather rapidly.
JPM Suggest: Put 1% in BTC
Among the most popular topics of discussion within the community is how big should be the percentage investors allocate to bitcoin. The narrative ranges from BTC maximalists saying that all eggs should be in one bitcoin basket to others advocating for a broader diversification.
However, very few outsiders of the crypto community had ever suggested any BTC exposure until last year. Perhaps the first one to go public with it was the legendary legacy investor Paul Tudor Jones III following the COVID-19-induced market crash.
Since then, more representatives of the traditional financial field have joined, and the latest ones are strategists from JPMorgan.
Cited by Bloomberg, they seemed somewhat cautious but still indicated that investors should look into BTC for 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.”
However, the analysts advised investors to explore other fiat currencies, such as the yen or the dollar, if they want to hedge a macro event and not cryptocurrencies as they are “investment vehicles and not funding currencies.”
BTC’s Declining Liquid Supply
JPM also touched upon another compelling topic, which has surged in popularity in the past several months – BTC’s decreasing liquid supply.
After all, numerous giant names joined the BTC craze since the summer of 2020. As of now, MicroStrategy owns over 90,000 bitcoins, Grayscale is purchasing new coins at record levels, Tesla allocated $1.5 billion in the asset, and numerous institutions bought in as well.
Simultaneously, the production rate of newly-created bitcoins was slashed in half in May 2020 following the third-ever halving. Consequently, the skyrocketing demand and the decreasing liquid supply affected the asset price, which is up by 50% since the start of the year – even after the latest massive correction.
“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.” – concluded JPM’s strategists.