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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
JP Morgan Launching Crypto Investment Product Tracking Public Company Stocks With Bitcoin Exposure – Finance Bitcoin News
JP Morgan Launching Crypto Investment Product Tracking Public Company Stocks With Bitcoin Exposure
JP Morgan is launching a structured investment product based on the performance of its “Cryptocurrency Exposure Basket,” which tracks stocks of publicly traded companies with exposure to cryptocurrencies. The weight of each stock is “determined based in part on exposure to bitcoin, correlation to bitcoin and liquidity,” according to the company’s filing with the U.S. Securities and Exchange Commission (SEC).
JP Morgan to Begin Providing Clients With Bitcoin Exposure
In a Tuesday filing with the SEC, JPMorgan Chase revealed a structured investment product that enables its clients to gain exposure to cryptocurrencies.
“The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC,” the company explained. The payment on which is “fully and unconditionally guaranteed by JPMorgan Chase & Co.”
JPMorgan elaborated:
The notes are designed for investors who seek exposure to the performance of the J.P. Morgan Cryptocurrency Exposure Basket (Mar 2021) of 11 unequally weighted reference stocks, which we refer to as the basket, as reduced by the basket deduction of 1.50%.
The investment bank added: “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 reference stocks represent the common stocks of “11 U.S.-listed companies that operate businesses that we believe to be, directly or indirectly, related to cryptocurrencies or other digital assets, including as a result of bitcoin holdings, cryptocurrency technology products, cryptocurrency mining products, digital payments or bitcoin trading,” JP Morgan detailed.
They include Microstrategy’s Class A common stock, Square’s Class A common stock, Riot Blockchain’s common stock, Nvidia’s common stock, Paypal Holdings’ common stock, and Advanced Micro Devices’ common stock.
The minimum denomination for the new investment product is $1,000. The notes are expected to price on or about March 31 and are expected to settle on or about April 6.
“The weights of the reference stocks were determined based in part on exposure to bitcoin, correlation to bitcoin and liquidity,” JPMorgan further clarified. “The basket may be subject to extreme price volatility and rapid and substantial decreases in price over the term of the notes.”
The investment bank has come a long way since its CEO Jamie Dimon called bitcoin a fraud back in September 2017. The firm recently came up with three key benefits for investing in BTC after its analysts predicted that the price of the cryptocurrency could reach $146,000 as its competition with gold heats up. The firm then recommended that investors could put 1% of their portfolios in cryptocurrency.
What do you think about JP Morgan launching a crypto product? Let us know in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, JPMorgan
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