For large institutional investors, cryptocurrency is not yet seen as an asset class. Jared Gross, JPMorgan’s Head of Institutional Portfolio Strategy Asset Management, shared his thoughts on Bloomberg’s “What Goes Up” podcast.
“The volatility is too high, and the lack of an intrinsic return that you can point to makes it very challenging,” Gross said. Previously, there was some hope that Bitcoin could act as a digital gold and provide a safe haven against inflation, but that hasn’t come to pass. “Most institutional investors are probably breathing a sigh of relief that they haven’t entered that market and probably won’t any time soon.”
Cryptocurrency prices skyrocketed in 2020-2021, partly due to the entrance of major traditional financial players (or at least their support). This was a major development for crypto advocates, who saw it as evidence of trust in the industry’s future.
However, digital assets experienced a sharp decrease this year as the Federal Reserve raised interest rates to combat unprecedented inflation. For cryptocurrencies, this less-flexible environment has been a problem. Bitcoin and Ether, the two largest tokens, have seen their values drop by approximately 70% and 60% respectively in 2022.