JPMorgan says other big companies are unlikely to copy Tesla's big cryptocurrency bet because of Bitcoin's volatility
- Tesla's bold
bitcoinbet is unlikely to be followed by other major corporates, according to JPMorgan.
- Bitcoin's volatility is the main reason that will deter more mainstream companies, strategists said.
- Adding a 1%
Bitcoin allocation"would cause a big increase in the volatility of the overall portfolio."
Don't expect other large companies to follow Tesla's $1.5 billion bitcoin purchase, JPMorgan said on Tuesday.
Bitcoin got a huge boost from the electric-car maker's announcement, which pushed the digital token to a record high of $48,000. But
But the more traditional JPMorgan said adding a 1% Bitcoin allocation "would cause a big increase in the volatility of the overall portfolio." Due to Bitcoin's 80% annualized volatility, an allocation of this size could mean a portfolio's volatility rises from 1% to 8%, the bank wrote.The bank, however, didn't deny that Tesla's endorsement will favor Bitcoin. "Irrespective of how many corporates eventually follow Tesla's example, there is no doubt that this week's announcement changed abruptly the near-term trajectory for bitcoin by bolstering speculative institutional flows via bitcoin futures as well as retail flows," strategists wrote. How sustained the price surge will be depends on "less speculative" institutional flows like those in the Grayscale Bitcoin Trust.
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