Strategists of JPMorgan Chase, one of the largest investment banks in the US, do not think Tesla’s investment of $ 1.5 billion in Bitcoin (BTC) will trigger similar investments.
The JPMorgan strategists, led by Nikolaos Panigirtzoglou, suggested that Bitcoin’s high volatility will keep mainstream companies away from Bitcoin. “The main problem with the idea that mainstream companies will follow the example of Tesla is the fluctuation of Bitcoin,” the strategists explained, according to Bloomberg’s report.
According to JPMorgan, even a small amount that companies will invest in Bitcoin is at high risk as companies usually keep their portfolio fluctuations around 1 percent. Even though Bitcoin accounts for 1 percent of the company’s portfolios, it can significantly increase the volatility of the overall portfolio. Volatility of a portfolio of companies can go up to 8 percent due to Bitcoin with an annual volatility of 80 percent.
Tesla Motors, Elon Musk’s company, was on the agenda by purchasing $ 1.5 billion of Bitcoin on February 8. BTC price jumped above $ 48,000 after the news, breaking a record.
Following this big step, leading names of the industry, including Galaxy Digital Founder Mike Novogratz, announced that they are confident that all companies in the USA will follow the Tesla example and allocate some of their balance sheets to Bitcoin.