An analyst at global investment bank JPMorgan says crypto is effectively non-existent as an asset class for most large institutional investors. “The volatility is too high and the lack of an intrinsic rate of return to refer to makes it very difficult“, he added.
JPMorgan on institutional investment in crypto
JPMorgan analyst Jared Gross discussed crypto and institutional investor interest in the asset class on Bloomberg on Friday. The senior investment strategist described:
As an asset class, crypto is effectively non-existent for most large institutional investors… The volatility is too high, the lack of an inherent return that you can point to makes it very difficult.
Gross added that he is “obvious”, that bitcoin has not turned out to be the kind of digital gold or safe haven that some had hoped. He pursues:
Most institutional investors are probably relieved that they haven’t jumped into this market and probably won’t anytime soon.
The cryptocurrency market has fallen significantly this year as the Federal Reserve and other major central banks around the world have raised interest rates to combat inflation. There have also been meltdowns and bankruptcies within the industry, including the recent fall of the crypto exchange FTX.
Meanwhile, a growing number of banks and financial institutions are offering crypto products and services to their institutional clients. Investment giant State Street, for example, said in September that it saw steady demand for crypto assets from institutional investors. Nasdaq recently created a unit of cryptocurrencies called “Nasdaq Digital Assets”, citing increased demand among institutional investors.
In addition, a study published in November by cryptocurrency exchange Coinbase found that institutional investors increased their allocations during the crypto winter. The firm pointed out that there is “a strong signal of acceptance of crypto as an asset class.” A survey published by financial giant Fidelity in October found that 74% of institutional investors surveyed plan to invest in digital assets.