As interest in cryptocurrencies grows, J.P. Morgan Chase has decided to give some of its customers what they want. The company is setting up an actively managed bitcoin fund for well-heeled clients, CoinDesk reported. Sources told the news website that the bitcoin fund could be rolled out as soon as this summer, and that the New York Digital Investment Group (NYDIG) would serve as J.P. Morgan’s custody provider.
A J.P. Morgan fund would differ from existing offerings by Pantera Capital and Galaxy Digital, which let wealthy clients buy and hold bitcoin without ever actually handling it. Galaxy and NYDig already offer bitcoin funds to Morgan Stanley clients, CoinDesk reported.
The bank’s move into the bitcoin market is an unlikely one. Earlier in the year, as the price of bitcoin skyrocketed, J.P. Morgan analysts called the cryptocurrency a shaky long-term investment. “Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed,” according to analysts.
Some backers of the cryptocurrency have called it “digital” gold, and therefore a solid investment. In fact, bitcoin would have to rise to a value of $146,000 for its market capitalization to equal total private-sector investment in gold via exchange-traded funds or bars and coins.
On February 19, bitcoin was trading at a value of more than $51,000. CoinDesk reported trading pegged bitcoin at more than $53,0o0 at one point on Monday (April 26). J.P. Morgan analysts in February called bitcoin overvalued, which would negate any diversification benefits.
Overall, the bank has been upping its digitization efforts, as Takis Georgakopoulos, global head of wholesale payment for the financial institution (FI), told PYMNTS. He noted that the global disruption of the pandemic has triggered an increased sense of urgency from clients to move to a digital environment, with a focus on guiding their organizations through the COVID-19 crisis. “This is not just about treasury departments trying to make money movements more efficient,” he said. “It’s about digitizing how the whole business operates.
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