JPMorgan launches ‘crypto exposure basket’ featuring MicroStrategy as Wall Street interest in bitcoin grows

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A growing number of institutions are warming to bitcoin.

  • JPMorgan’s new product will give buyers exposure to big bitcoin players like MicroStrategy and Square.
  • It is a sign of growing interest in cryptocurrencies on Wall Street, with BlackRock and Goldman also moving in.
  • JPMorgan’s product will also provide exposure to Riot Blockchain, Nvidia and PayPal.
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JPMorgan is launching a product to give investors exposure to cryptocurrencies, in the latest sign that bitcoin’s meteoric rise is drawing widespread interest on Wall Street.

An SEC filing on Tuesday by the bank showed it is creating a “basket of companies with exposure to cryptocurrency” that will be dominated by MicroStrategy, Square, Riot Blockchain and Nvidia.

MicroStrategy has over 90,000 bitcoins on its balance sheet, worth upwards of $4.9 billion based on Wednesday’s bitcoin price, while Square owns more than 8,000 bitcoins. Riot is focused on crypto mining, while Nvidia’s technology is commonly used in this activity.

The companies’ shares often move as the bitcoin price rises or falls. JPMorgan will create debt products linked to the performance of the crypto basket, giving investors indirect exposure to the cryptocurrency market.

However, JPMorgan’s filing stressed “the notes do not provide direct exposure to cryptocurrencies and the performance of the basket may not be correlated with the price of any particular cryptocurrency, such as bitcoin.”

MicroStrategy will make up 20% of the crypto exposure basket, Square 18%, Riot 15% and Nvidia 15%. PayPal, Advanced Micro Devices, and CME Group, which are all linked to bitcoin exchanging or mining, are also in the basket.

The notes – essentially fixed-income products that do not pay interest – will come in denominations of $1,000 and payments will become due in May 2022. There will be a deduction of 1.5% from any gains, in effect a fee.

So if the companies in the basket gained 20%, investors would receive 18.5% on a $1,000 investment, amounting to $1,185.

JPMorgan’s creation of a crypto basket is more evidence of the growing allure on Wall Street of bitcoin, which has climbed more than 80% in 2021.

Goldman Sachs is restarting its crypto trading desk, and found in an internal survey of nearly 300 clients that 40% had exposure to cryptocurrencies.

BlackRock, the world’s biggest asset manager, has said two of its funds can invest in bitcoin futures, while BNY Mellon has announced intentions to manage cryptocurrencies.

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78% of institutional investors are not planning on investing in cryptocurrencies, though a majority say crypto is ‘here to stay,’ JPMorgan survey finds

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  • A JPMorgan survey of 3,400 institutional investors shows a majority do not plan to invest in or trade cryptocurrencies. 
  • However, 58% of investors surveyed said cryptocurrencies are “here to stay.”
  • The survey is the latest look into institutional sentiment on cryptos as more firms enter into the space.
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An overwhelming majority of institutional investors surveyed by JPMorgan said they do not plan to start investing or trading cryptocurrencies, though 58% said crypto is “here to stay.”

In a survey of roughly 3,400 investors representing 1,500 institutions around the work, 11% of investors said their firm either trades or invests in crypto, while 89% said their firm doesn’t.

Out of the investors who answered “no,” 78% of investors said it’s “not likely” their firm will trade or invest in crypto, while 22% answered “likely.”

The survey sheds a light on the state of institutional investor interest in cryptocurrencies. While bitcoin’s parabolic rise has garnered the attention of institutional and retail investors alike, the institutional community remains somewhat divided on the future of crypto. 

When asked: “What is your opinion on Crypto?” 14% answered “probably rat position squared (something to avoid,)” while 7% said it “will become one of the most important assets.” 58% of investors said it’s “here to stay,” and 21% answered that crypto is just a “temporary fad.” 

Almost all investors (98%) said they believe fraud in the crypto world is “somewhat” or “very much prevalent.” 

Multiple well-known Wall Street behemoths are taking in interest in cryptocurrencies and bitcoin. Most recently, a unit of Morgan Stanley said it’s exploring whether to invest in cryptocurrencies, according to Bloomberg. Morgan Stanley also has a 10.9% stake in MicroStrategy, which gives the bank indirect exposure to 7,681 bitcoin. 

BlackRock has authorized two of its funds to invest in bitcoin futures, while JPMorgan strategists have a theoretical price target of $146,000 for bitcoin.

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