According to Odaily, JPMorgan's global market strategist Jack Manley and research analyst Sahil Gobba have released a report titled 'Is Cryptocurrency Worth a Place in Portfolio Construction?' The report highlights the potential appeal of cryptocurrencies, largely due to their potential for excess returns. However, it also acknowledges the challenges that come with investing in this asset class. While Bitcoin's returns have been impressive, its volatility is significantly higher, being four times that of the S&P 500 index. The role of cryptocurrencies in portfolio construction largely depends on an investor's risk tolerance.
Cryptocurrencies are inherently unpredictable, with limited visibility on future price trends. Although blockchain technology is exciting, the low entry barriers mean that new tokens with improved functionalities could enter the market, rendering existing tokens obsolete and potentially worthless. Therefore, for most investors, any allocation to cryptocurrencies in a portfolio should remain small enough to ensure that even in the event of a significant sell-off, the overall portfolio objectives are not compromised, and good diversification is maintained.
Previously, JPMorgan analysts noted in a report that from an investor positioning perspective, Bitcoin, the US dollar, and stocks are considered the most vulnerable asset classes.