According to JPMorgan’s head of institutional portfolio strategy, asset class volatility continues to be a challenge for money managers.
According to Jared Gross, head of institutional portfolio strategy at JPMorgan Asset Management, large institutional investors are still largely staying away from the cryptocurrency market because the asset class’ volatility poses a challenge to money managers.
“As an asset class, cryptocurrency is effectively nonexistent for most large institutional investors,” Gross explained, adding that “the volatility is too high, and the lack of an intrinsic return that you can point to makes it very difficult.”
Most institutional investors, according to Gross, are currently “breathing a sigh of relief that they didn’t jump into that market,” which is unlikely to happen anytime soon.
The bear market also put an end to the notion that Bitcoin (BTC) could be a form of digital gold or an inflation hedge, according to Gross, who stated that it is “self-evident” that this is not the case.
The crypto market has experienced a year of precipitous declines. As of this writing, Bitcoin had dropped from $47,700 in January to under $17,000 by the end of December, while Ether (ETH) had dropped from $3,700 to $1,200 in the same time period. According to CoinMarketCap, the total crypto market capitalization has dropped from $2.2 trillion to nearly $810 billion.
Although many institutional portfolios still exclude cryptocurrency, large financial institutions are increasingly embracing it. BNY Mellon, the oldest American bank, announced in October that it would protect Ether and Bitcoin for select institutional clients. Société Générale, a French bank, also received regulatory approval as a provider of digital assets services.
According to Cointelegraph, BNY Mellon CEO Robin Vince stated that “client demand” was the “tipping point” behind the launch of institutional-focused crypto services.
According to a recent JPMorgan Chase report, nearly 43 million Americans, or 13% of the population, have owned cryptocurrency at some point in their lives. Since before 2020, when it was only around 3%, the figure has risen dramatically.