Institutional Demand For Bitcoin Not Slowing Down
Institutional demand for Bitcoin is stronger than ever, after more evidence this week suggesting two of America’s biggest banks are taking more action to educate their corporate clients on the capabilities of the leading cryptocurrency.
News has leaked about JPMorgan educating its clients on Bitcoin as an investment tool, saying how it should be treated as a portfolio diversifier.
And it appears MicroStrategy and Tesla making giant moves into the Bitcoin market is triggering the interest of Goldman Sachs’ institutional clients, who are seriously considering making Bitcoin a part of their balance sheet and using BTC as a means of payment
The news comes just weeks after Bitcoin Maximalist reported on America’s biggest banks all listening to their institutional clients whose demand for Bitcoin had ramped up, making the banks take action.
JPMorgan Tells Its Clients To Consider Bitcoin As A Portfolio Diversifier
America’s biggest bank, JPMorgan has reportedly told its clients to consider Bitcoin as a portfolio diversifier, according to a leaked report.
JPMorgan distributed an educational deck to clients to help them understand the basics, risks and potential of Bitcoin, and concludes that ‘if sized correctly’ Bitcoin can be a portfolio diversifier.
The educational deck was obtained by The Block, who says it covers Bitcoin basics as well as the possible ramifications of adding it to an investment portfolio.
In one deck slide titled ‘How Others Are Valuing Crypto?’ it details three common metrics used by market analysts to determine today’s price and predict the future price of Bitcoin, which it suggests ‘significant upside is possible’.
The slide uses Metcalfe’s Law – a value of a network proportional to the square number of its users — to determine Bitcoin’s per-coin valuation of $21,667.
However, it also uses the gold market cap divided by Bitcoin’s maximum supply of 21 million to determine a valuation of $540,814.
The bank goes further by dividing the total value of money supply by 21 million and determines a value of around $1.9 million per Bitcoin is possible.
Bitcoin Is Not Gold, Says JPMorgan
The deck’s author distances the Bitcoin as digital gold correlation, however, and says Bitcoin’s volatility ensures it shouldn’t be considered a safe haven, just yet.
‘Bitcoin is not gold, nor do we think of it as such. When it comes to portfolio construction, it has diversifying properties like gold, but its volatility characteristics and correlation profile refute the comparison to the traditional safe haven asset.’
JPMorgan also tells its clients that there is no evidence ‘that outflows from gold are directly linked to inflows into Bitcoin,’ and suggests that in the near term Bitcoin should be treated as a ‘diversifying risky asset rather than protection akin to Treasuries and gold.’
Goldman Sachs: Institutional Demand For Bitcoin Not Slowing Down
Global investment bank Goldman Sachs says institutional demand for Bitcoin shows no sign of slowing down.
According to the bank’s head of digital assets Global Markets division Mathew McDermott, a survey of Goldman’s institutional clients shows that 61% plan to increase their cryptocurrency holdings, while 76% say the price of Bitcoin could reach $ 100,000 this year.
McDermott explained the investment bank had conducted a survey of the firm’s institutional clientele, from ‘hedge funds to asset managers, macro-funds, banks, corporate treasurers, insurance and pension funds,’ and concluded that ‘all of our discussions with institutional clients are really focused on bitcoin.’
‘In terms of institutional demand, we have seen no signs of that abating… We see a huge amount of demand institutionally, [and] we’re also seeing that reflected in the private wealth management space as well.’
McDermott said corporate treasurers were considering whether to hold Bitcoin as part of their balance sheet, and/or follow Tesla’s model and introduce it as a payment mechanism.
MicroStrategy was the first publicly traded company to announce it was holding Bitcoin as a significant part of its balance sheet. And McDermott says it is the main topic for discussion with corporate treasurers, which is being driven by fears of ‘asset devaluation’ and ‘negative rates.’
Goldman Sachs’ Head of Digital Sssets Global Markets Division claims the banks’ corporate clients were also seriously considering following Elon Musk’s model and accepting Bitcoin as a means of payment.
‘They’re discussing now, should we consider it as a payment mechanism? … particularly in the context of Tesla’s announcement,’ says McDermott in light of tesla’s $1.5 billion investment in Bitcoin and announcement that it will start accepting Bitcoin for its products.
Institutional Demand for Bitcoin Is Growing
The institutional demand for Bitcoin is without question, and it seems that every week there’s more big news of investment banks gradually moving towards Bitcoin acceptance.
JPMorgan and Goldman Sachs are two of the world’s biggest banks, and they have succumbed to the pressure of their clients.
With the likes of MicroStrategy and Tesla making giant moves into the Bitcoin market, other corporates have to make theirs, and they need their investment banks to be onside.
Not only that, the investment banks’ own demand for Bitcoin is stepping up because they are starting to realise the capabilities of Bitcoin, and know they cannot be left behind.