JPMorgan launches 'crypto exposure basket' featuring MicroStrategy as Wall Street interest in bitcoin grows

JPMorgan launches ‘crypto exposure basket’ featuring MicroStrategy as Wall Street interest in bitcoin grows

A growing number of institutions are warming to bitcoin. NurPhoto/Getty Images

JPMorgan’s new product will give buyers exposure to big bitcoin players like MicroStrategy and Square.

It is a sign of growing interest in cryptocurrencies on Wall Street, with BlackRock and Goldman also moving in.

JPMorgan’s product will also provide exposure to Riot Blockchain, Nvidia and PayPal.

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JPMorgan is launching a product to give investors exposure to cryptocurrencies, in the latest sign that bitcoin’s meteoric rise is drawing widespread interest on Wall Street.

An SEC filing on Tuesday by the bank showed it is creating a “basket of companies with exposure to cryptocurrency” that will be dominated by MicroStrategy, Square, Riot Blockchain and Nvidia.

MicroStrategy has over 90,000 bitcoins on its balance sheet, worth upwards of $4.9 billion based on Wednesday’s bitcoin price, while Square owns more than 8,000 bitcoins. Riot is focused on crypto mining, while Nvidia’s technology is commonly used in this activity.

The companies' shares often move as the bitcoin price rises or falls. JPMorgan will create debt products linked to the performance of the crypto basket, giving investors indirect exposure to the cryptocurrency market.

However, JPMorgan’s filing stressed “the notes do not provide direct exposure to cryptocurrencies and the performance of the basket may not be correlated with the price of any particular cryptocurrency, such as bitcoin.”

MicroStrategy will make up 20% of the crypto exposure basket, Square 18%, Riot 15% and Nvidia 15%. PayPal, Advanced Micro Devices, and CME Group, which are all linked to bitcoin exchanging or mining, are also in the basket.

The notes - essentially fixed-income products that do not pay interest - will come in denominations of $1,000 and payments will become due in May 2022. There will be a deduction of 1.5% from any gains, in effect a fee.

So if the companies in the basket gained 20%, investors would receive 18.5% on a $1,000 investment, amounting to $1,185.

JPMorgan’s creation of a crypto basket is more evidence of the growing allure on Wall Street of bitcoin, which has climbed more than 80% in 2021.

Goldman Sachs is restarting its crypto trading desk, and found in an internal survey of nearly 300 clients that 40% had exposure to cryptocurrencies.

BlackRock, the world’s biggest asset manager, has said two of its funds can invest in bitcoin futures, while BNY Mellon has announced intentions to manage cryptocurrencies.

JPMorgan SEC filing

JPMorgan regulatory filings reveal ‘basket’ product tied to crypto-linked public companies

A cluster of regulatory filings with the Securities and Exchange Commission indicate that Wall Street investment bank JPMorgan is giving its investor clients a way to gain exposure to crypto in the form of public-company stocks involved with digital assets.

The structured product documentation details so-called “Insight Notes Linked to the J.P. Morgan Basket of Companies with Exposure to Cryptocurrency.” The “basket” of companies includes names well-known in the crypto space, including market intelligence firm MicroStrategy, the Jack Dorsey-led payments company Square and PayPal, another payments company that is building support for crypto into its app and earlier this week announced its pending acquisition of crypto security firm Curv.

Other companies in the basket include Riot Blockchain, NVIDIA, AMD, semiconductor giant TSMC (in the form of American depository shares), Intercontinental Exchange, CME Group, Overstock and Silvergate.

JPM stresses in the product description that the exposure provided is not directly tied to any particular cryptocurrency, including bitcoin, and that performance of the notes is not tied to performance in the digital asset market itself. As the documentation explains:

“The notes are designed for investors who seek exposure to the performance of the J.P. Morgan Cryptocurrency Exposure Basket (Mar 2021) of unequally weighted Reference Stocks, which we refer to as the Basket, as reduced by the Basket Deduction of 3.00%. Notwithstanding the name of the Basket, the notes do not provide direct exposure to cryptocurrencies and the performance of the Basket may not be correlated with the price of any particular cryptocurrency, such as bitcoin.”

Per the documentation, the notes carry a pricing date of March 26, an original issue date of “on or about March 31, 2021” with observation and maturity dates on May 2, 2022 and May 5, 2022, respectively.

The existence of the structured product is perhaps another sign that demand among the Wall Street clientele for any kind of exposure to crypto, albeit indirect, is ascendant. A digital asset executive for Goldman Sachs recently spoke to this degree of investor interest around the asset class during a recent podcast appearance.

The developments come soon after JPMorgan distributed an educational deck to clients to help them understand the basics, risks and potential of bitcoin and cryptocurrencies. The distribution took place in February, as previously reported.

Hat tip @MacroScope17

JPMorgan to Launch Investment Basket with Crypto-Linked Stocks

Wall Street giant JPMorgan is planning to provide its clients indirect exposure to cryptocurrencies with investment into several companies that are heavily invested in Bitcoin and the crypto economy as a whole, according to the latest Securities and Exchange Commission (SEC) filing.

In structured investment documentation titled “Insight Notes Linked to the J.P. Morgan Basket of Companies with Exposure to Cryptocurrency,” the investment bank revealed that it is going to offer an investment basket with 11 companies that are closely tied to the cryptocurrency economy.

MicroStrategy, a business analytics company heavily invested in Bitcoin, will have 20 percent weight into the stock basket, followed by Square with 18 percent, Riot Blockchain with 15 percent and NVIDIA with 15 percent.

Other companies in the basket are PayPal, which offers crypto trading and bought crypto custody startup Curv, chipmaker AMD, Taiwanese semiconductor giant TSMC, Intercontinental Exchange, CME Group, Overstock and Silvergate.

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JPMorgan will offer investment notes with a $1,000 minimum investment, which will payout based on basket companies’ market performances. The notes will carry a maturation date of May 2022, and there will be a deduction of 1.5 percent in the management fee.

Not Investing in Crypto

Additionally, the investment bank stressed that the structured investment product is not directly tied to any cryptocurrencies, and the performance will not correlate to the cryptocurrency market performance.

“The notes are designed for investors who seek exposure to the performance of the J.P. Morgan Cryptocurrency Exposure Basket (Mar 2021) of unequally weighted Reference Stocks, which we refer to as the Basket, as reduced by the Basket Deduction of 3.00%. Notwithstanding the name of the Basket, the notes do not provide direct exposure to cryptocurrencies and the performance of the Basket may not be correlated with the price of any particular cryptocurrency, such as bitcoin,” the SEC filing noted.