JPMorgan Chase, the largest U.S. bank with $3.3 trillion worth of assets under management, claims that a small cryptocurrency allocation of up to two percent could make your portfolio “more efficient.”
Based on its research, the banking institution came up with three reasons to own crypto: the overvalued equities market, treasury bonds faltering a good hedge, and unforeseen market shocks such as skyrocketing inflation.
Bitcoin is the poorest hedge during drawdowns
On the other hand, JPMorgan notes that cryptocurrencies typically serve as the worst hedge during major drawdowns in global stocks:
Over shorter intra-month and intra-quarter horizons, crypto assets continue to rank as the poorest hedge for major drawdowns in Global Equities, particularly relative to the fiat currencies like the dollar which they to displace.
When equity markets crashed around the world back in March 2020, Bitcoin crashed even harder, erasing more than half of its value on March 12, the day that was infamously dubbed “Black Thursday.” At the same time, the U.S. Dollar Index (DXY) rocketed to almost 103.
Out-of-control U.S. dollar inflation could, however, potentially "alter" this pattern, according to JPMorgan.