Investment

JPMorgan offers an exhibition of BTC, ETF in sheep’s clothing

The uptake of cryptocurrency has penetrated the mainstream at an exponential rate. While most investors go directly to the purchase of similar bitcoins (BTC) and ether (ETH), several skeptical investors want to invest in the cryptocurrency economy without direct token volatility.

This volatility is evident in recent historical high Bitcoin reached around $ 61,700 on March 14, then dropped to $ 56,000 and then rose to about $ 59,000 at the time of publication. The market capitalization of bitcoins has now surpassed the market capitalization Combination of Visa and Mastercard cards.

For overly cautious investors recently JP Morgan announced its Cryptocurrency Exposure Basket or CEB, a portfolio of debt instruments consisting of 11 shares. These shares are either companies that hold bitcoins as a treasury asset or companies in industries complementary to cryptocurrencies.

However, the effectiveness of such a basket of stocks compared to bitcoins remains to be seen. Ben Weiss, President and Chief Operating Officer of CoinFlip, a bitcoin ATM company, told Cointelegraph that the “strategy is viable.” cryptocurrencies. “

The CEB contains an unevenly weighted basket of reference shares. Allocates 20% to MicroStrategy and 18% to Square. Both organizations are led by prominent bitcoin bulls Michael Saylor and Jack Dorsey. More importantly, both companies own bitcoins as a treasury asset on their balance sheet.

MicroStrategy is a publicly traded company with the largest bitcoin reserves of $ 91,326, valued at $ 5.25 billion, representing 71% of the company’s market capitalization. In comparison, Square owns 8,027 BTC worth $ 461 million, which represents only 0.4% of the company’s total market ceiling.

However, Joshua Greenwald, Uphold’s chief risk officer – a cryptocurrency platform – told Cointelegraph why the stock could adversely affect investors: “This can prove to be a dangerous way to get into BTC exposure because of pressure on management. for holding large positions BTC can create another disadvantageous lever on sale. “

CEB puts the auxiliary crypto ecosystem in the foreground

Along with companies that directly hold bitcoin, companies related to the cryptocurrency industry have also come to the fore due to their perceived high correlation with bitcoins. At CEB, Riot Blockchain and Nvidia Corporation receive 15% allocations. The four mentioned companies make up 68% of the total debt instrument allocation.

Riot Blockchain is a cryptocurrency mining company whose shares have been in absolute trouble since February high correlation with bitcoins. In addition to being associated with bitcoins in connection with mining, Riot also owns 1,175 BTCs in the balance sheet worth approximately $ 68 million, representing 1.6% of its total market capitalization on the Nasdaq.

Nvidia Corporation is a manufacturer of graphics units that is now also used in the extraction of proof-of-work cryptocurrencies such as BTC and Ether. The PoW cryptocurrence mining rate is highly dependent on GPU performance and features is used.

The growth of companies like Riot and Nvidia is directly linked to the growth of bitcoins due to their participation in the cryptocurrency ecosystem. This applies to all exchanges trading in bitcoin products, to energy companies that get involved in bitcoin mining, and even to payment platforms like PayPal that support bitcoin.

Other crypto relief shares that are part of JP Morgan’s CEB include PayPal Holdings, Advanced Micro Devices, Taiwan Semiconductor Manufacturing Company Limited, Intercontinental Exchange, CME Group, Overstock.com and Silvergate Capital Corporation. All of these companies are in some way connected with cryptocurrency and bitcoins, whether it is part of the mining and energy process or the listing of bitcoin products, as is the case with ICE-owned CME and Bakkt.

One of these baskets is missing Tesla shares. On February 8, Elona Muska bought $ 1.5 billion worth of BTC at the time. He pushed this move himself the price of bitcoin by $ 3,000 in a few minutes, which shows the impact that Musk and Tesla have on cryptotracks. In fact, the CEO’s influence on the crypt market is great now referred to as “Musk Effect”. Given all this, it would be obvious to include Tesla shares in the CEB. However, JP Morgan’s reason for excluding Tesla’s shares may be that he feels that Tesla’s shares are “dramatic overrated. “

Even Sam Bankman-Fried, CEO of FTX – Cryptocurrency Derivatives Exchange – mentioned Cointelegraph, as Tesla had an interesting correlation with BTC:

“TSLA is probably the most interesting: Both are speculative assets; they have overlapping investor bases; Tesla owns some BTCs; and both often switch to Elon Musk’s tweets. MSTR is a more boring example.”

CEB exposure to cryptocurrencies is limited

Although the CEB of JP Morgan could be a “gateway” for traditional financial market investors to get into the cryptocurrency, the actual exposure that the basket would give to bitcoin investors seems limited, according to Weiss:

“Most people invest in a technology company like MicroStrategy, and less in the bitcoin side, despite its large bitcoin exposure.” This is because if you want to compare holding shares and holding bitcoin directly, if you want to be exposed to bitcoin, bitcoin is still the best way to expose it. “

In addition, the potential for high fees for working with older systems, such as those at JP Morgan, could also be a cause for concern. Greenwald commented: “Adherence to good safety and the use of a relatively easy-to-use storage provider is likely to prove more cost-effective than the annual fees for most managed solutions.”

Moreover, CEB is not the only way for retail and institutional investors to access bitcoin through traditionally regulated markets. Grayscale’s Bitcoin Trust has established itself as the forerunner of choice for institutional investors to access bitcoins. It really is biggest public holder of bitcoins in the world. It currently owns 649,130 ​​BTC, which is currently appreciate to about $ 37 billion.

Related: Bitcoin ETFs may come to the US, but not all cryptoinvestors think it’s needed

In addition to grayscale, two exchange-traded bitcoin funds called the Purpose ETF and the Evolve ETF were listed on Canadian markets. Within one month of its launch, the two ETFs merged to have nearly $ 1 billion in BTC assets under management. Bankman-Fried also commented on the viability of the CEB, stating:

“You can try to do it and get some correlation – so it’s not completely unnecessary.” In the end, however, there will be a great demand from investors for BTC, or at least for crypto companies. I would guess that it is better for listed cryptocurrency companies to go international. “

In addition to these methods, there are other ways in which institutions could be exposed to bitcoin. One of the main strategies, in addition to buying bitcoins as treasury assets, may be to allow digital payment channels. The most logical choice for this could be Amazon and Facebook. Facebook could very well be the first major social market to enable digital payments through your own stablecoin, Diem, formerly known as Libra. Diem is due to be launched in 2021 and is set to become a game changer between crypto payments, stablecoins and even the central bank’s digital currencies.

While this is a great sign that JP Morgan is trying to get into cryptocurrencies, the debt instrument appears to be a bitcoin ETF in sheep’s clothing with a limited advantage of Bitcoin over holding the asset itself. For this reason, it is highly unlikely that experienced investors will join it in the long run, especially when all bitcoins have been mined and a shortage begins.

Morgan Stanley, a competing investment bank, has taken a different path to provide bitcoin exposures to its clients. On March 17, it announced Bitcoin investments for its wealthy clients. The investment bank has AUM $ 4 trillion and will allow premium clients to invest in bitcoins through the Galaxy Digital bitcoin fund, the Institutional Bitcoin Fund and the FS NYDIG Select Fund. There will be an allocation ceiling for clients of 2.5% of their total portfolio.

This step indicates the fact that now is not the time to look for an alternative exposure to BTC, given that it is still in the early stages of acceptance. ETFs and such pseudo-ETFs could be a solution in countries where investors are restricted by restrictive regulations. Otherwise, there seems to be no real alternative to actually buying and throwing bitcoins.



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