JPMorgan Chase: Bitcoin volatility has reached four times that of the S&P 500, portfolio construction mainly depends on risk tolerance

On December 5th, J.P. Morgan's global market strategist Jack Manley and research analyst Sahil Gaba released a report titled "Does Cryptocurrency Deserve a Place in Portfolio Construction?" The report pointed out that the appeal of cryptocurrency largely lies in its potential for excess returns, but challenges still exist. Although Bitcoin's returns are impressive, its volatility is also very high, four times that of the SP 500 index. The role of cryptocurrency in portfolio construction mainly depends on risk tolerance. Cryptocurrencies are essentially unpredictable: future price trends have little visibility and while blockchain technology is exciting, there are few barriers to entry which means as new tokens with improved features enter the market, existing tokens may become obsolete (and therefore worthless). Therefore, for most investors any allocation to cryptocurrencies within their portfolios should be kept sufficiently small to ensure it does not disrupt overall investment objectives and maintains good diversification even in case of significant sell-offs. In previous news, J.P. Morgan analysts stated in a report that from an investor position perspective Bitcoin, US dollars and stocks were the most vulnerable asset classes.