“Developments over the past year have not changed our reservations about the limited role that crypto currencies play in global portfolio diversification or as a hedging instrument.”Arguments as to why bitcoin may well have its right to exist in a portfolio are summarized in this article. JPMorgan Chase already involved in several blockchain projects JP Morgan Chase has been observing and studying digital currencies and the technology behind the block chain for some time now. The American bank has already introduced the “Interbank Information Network” initiative in 2017, which now brings together a network of 320 banks. The aim behind the project is to accelerate cross-border payments. Recently, the bank was also said to be interested in an Ethereum startup. According to a report, a merger of the JPMorgan blockchain unit “Quorum” and the Ethereum accelerator ConsenSys was under discussion. JP Morgan Chase was formed in 2000 when Chase Manhattan Bank and J.P. Morgan & Co. merged. With around 256,000 employees, it generates annual revenues of around 110 billion dollars. With total assets of around 2,600 billion dollars, the bank is also the leading bank in the USA.
The US investment bank JPMorgan Chase has published a report on blockchain, digital and crypto-currencies. The report states that blockchain is still many years away from being widely used. In the 74-page report, the report’s authors state that they see “long-term potential” for Distributed Ledger Technology (DLT) to change the current business model for banks, by providing a more efficient method for transferring information. They also explain in the study that the speed at which blockchain technology can be introduced, depends on “solving legal and technical problems” — especially those related to cross-platform integration. Basis for fast payments and digital currencies already established It should be noted that although blockchain technology has not yet entered into the mainstream, it has already developed beyond experimentation. For example, the basis for fast payments and digital currencies has already been established. According to the study, blockchain solutions in the area of financing and payments currently offer the highest efficiency in the banking sector. However, the final implementation of blockchain in the banking sector is likely to take another 3-5 years, say the authors of the study. Stock exchanges have also already come to appreciate the efficiency of the technology, particularly in the areas of settlement/clearing and collateral management. JP Morgan has also commented on private sector projects such as Facebook’s Libra. According to JP Morgan, projects like Libra-Stablecoin require a higher degree of centralisation. According to the study, private stablecoins would probably encounter technical hurdles, including the need for “intraday liquidity“. Cryptocurrencies continue to play a limited role in portfolio diversification or as hedging instruments With regard to the general crypto-currency market, the bank sees certain signs of maturity, due to increasing institutional participation and the introduction of new products on regulated exchanges. The continuing high price volatility is also mentioned. According to the report, bitcoin has already shown its “value”, but the currency’s usefulness for portfolio diversification still needs to be proven.