J.P. Morgan says Bitcoin is their Alternative Asset of Choice: Should Advisors Recommend Crypto to their Clients?
In a recent article in Fortune, J.P. Morgan said “they now see digital assets and hedge funds as it’s preferred alternative asset classes, with real estate being moved to the sidelines as mortgage rates soar.” So, what does this mean for investors looking to diversify their portfolio with alternative investments? Is now the time to buy Bitcoin or is it too late or too early?
One only needs to type in the word Bitcoin into their search engine of choice in order to be inundated with articles and resources available to inform yourself on how Bitcoin works, why it has been a favorable alternative asset over the past few years for most, and some even go so far as to say that it is the only asset that will matter in the future. Of course, we believe in diversification so the latter statement is off the table for us, but in keeping with the diversification theme we believe that it is important to consider cryptocurrency and more specifically Bitcoin when looking at your clients’ investment portfolios.
Philosophically Bitcoin seems to be a dream come true for libertarian minded investors, or even those investors with a slight disdain for centralized currencies that are often susceptible to manipulation. Bitcoin exists outside of the current fiat monetary system, a trait that it does in fact share with precious metals like gold and silver. Many gold bugs and hodlers will say that the similarities end there, while more open minded investors can draw additional parallels. A big difference is that Bitcoin has a total capped supply while gold continues to have production and discoveries, adding around 2% to the total supply year after year.
Experts have actually argued both for and against this trait, some say that the limited supply will increase the long term price of Bitcoin while others argue that it will eventually make it obsolete as there will be no more coins generated. Regardless of that argument, Bitcoin has been a hot topic economically and financially. There’s no doubt that Bitcoin has rocketed in price since it’s launch but the recent pullback has advisors asking whether or not now is the time to make that recommendation for clients.
How Can Clients Invest in Bitcoin?
With the decline in the price of Bitcoin, the sector that has us most interested is the crypto mining space. Again, the analogies between Bitcoin being digital Gold lend themselves to the data centers that produce the Bitcoin being called miners. They are just that however, large data centers. There are certainly some interesting aspects of crypto miners, if your clients want exposure to Bitcoin specifically.
- The fall in price has made some miners attractive
- Although many are highly leveraged there are some that have sound financials
- Many are very green energy focused which could bode well for the future
- Much like precious metal miners, crypto miners typically outperform the underlying asset in bull market runs
- Most hold Bitcoin on their balance sheets
- They are publicly traded companies regulated by the SEC
There you have it, if you are looking for crypto exposure for your clients, consider the crypto/Bitcoin mining space as an alternative investment option.