A data-based approach to cryptocurrency investment shows promise, so why are investment advisors at top firms still pushing clients away?
The crypto space and market cap may be a small percentage of the trillions invested through the worldwide equities market or the quantity that the us Federal Reserve System is in a position to print. While the promise of blockchain technology and therefore the way forward for Bitcoin (BTC) has been realized through major traditional players unveiling their own versions of the technology, their hesitant investment advice doesn’t seem to match their actions.
Real life application
Recently, Cointelegraph reported that wealth manager Adam Pokornicky had claimed he almost lost a client to the opinions of the highest financial holding companies within the world. Adam said that the client, who was getting to buy a minor amount of Bitcoin, decided to not proceed with the acquisition because JPMorgan Chase and Goldman Sachs advised against it. The words that changed the client’s minds are unknown, but Adam was confident that they influenced the client’s choice.
While the banks’ motives aren’t immediately clear, long-term application of this suppression will allow banks to retain a particular degree of power as early adopters while their clients are instructed to attend . Benjamin Boyle, CEO of Caipiteal investment management firm, spoke to Cointelegraph about his own recommendations for cryptocurrency to his clients:
“An investment into cryptocurrency should be treated like investing during a startup or early stage company, therefore the company’s metrics should be analysed as if it had been an equity investment. So if a client is looking to take a position for the future my suggestion is that the client employs advanced portfolio theory to manage their portfolio. during this case the client would plan to invest only alittle portion of their total wealth into cryptocurrencies.”
Investment advisors taking a data-based approach might be doing a disservice to their client in advising against Bitcoin investment as a hedge to any stock portfolio. While investment advisors do typically warn of startup risks, Bitcoin has arguably grown beyond the classification of a startup. Therefore, because the interest in BTC continues to rise, investment advisors may substitute the way of their clients ultimately investing.
JPM Coin and lots of questions
JPMorgan, the most important bank within the U.S., recently created and tested a JPM digital coin. This makes JPMorgan the primary bank to make a digital coin representing fiat currency. While creating a stablecoin isn’t necessarily an investment instrument, it shows the industry’s willingness to embrace distributed ledger technology at its core. JPM Coin was created to make sure speedy cross-border payments and securities transactions between institutional clients of the bank.
By using the digital coin, the bank seeks to make sure secure transactions are going to be possible by the utilization of its Quorum Blockchain platform. This platform was created in 2016, and it’s one among the pioneer partners of the Ethereum Enterprise Alliance.
JPM Coin currently is a stablecoin, pegged at a 1:1 ratio with the U.S. dollar. it’s a completely new stablecoin for the company banking sector, but there are some well-known predecessors, one among which is Circle’s USD coins, launched in 2018 with the backing of Goldman Sachs.
Apart from this is often the controversy surrounding Jamie Dimon, the CEO of JPMorgan, who features a history of creating statements that conflict together with his institution’s actions. Jamie once expressed his lack of interest in Bitcoin, calling it “fraud” in 2017, yet the corporate he manages has since gained an interest within the crypto space. this might mean that Jamie decided to vary or a minimum of make exceptions to his earlier beliefs. Another possibility is that he made those statements because he wanted to shift the main target of investors faraway from Bitcoin.
Cointelegraph reported that at the 2019 World Economic Forum in Davos, Jamie Dimon’s response to at least one of the questions showed that he’s considerably against Bitcoin but not blockchain technology. At that summit, he mentioned blockchain as a “real” technology which will soon replace certain databases. Amid of these inconsistencies, Cointelegraph further reported that JP Morgan approved banking accounts for Coinbase and Gemini crypto exchanges back in April 2020.
Since the CEO of JPMorgan appears to possess nothing against blockchain technology, then one could say that established banks are trying to convince their investors to shift their focus toward employing a centralized entity that banks can enjoy , just like the JPM stablecoin.
Further exploring this incongruity, it’s evidently important to observe what institutions do, not what they assert . for instance , during a conversation with Cointelegraph, Michelle Dougherty — one among DigiByte’s awareness team members and a number one lawyer within the crypto space with experience at the us Department of State also as a former us attorney — reflected on her interactions with investment advisors from one among the larger U.S. banking institutions:
“I was personally discouraged from purchasing Bitcoin once I wanted to back in 2014 by my financial advisor from Merrill Lynch. He said it had been ‘too risky’ of an investment. Like an idiot I followed his bad advice. only recently , Bank of America Merrill Lynch came out and named Bitcoin because the best investment of the last decade.”
Dougherty further acknowledged that the recent hiring of a Coinbase executive by the U.S. Office of the Comptroller of the Currency is further highlighting the very fact that traditional banks are making a u-turn on the industry while attempting to regulate the narrative:
“When these new headlines are beginning I just chuckle to myself and know that the legacy financial systems are just trying to delay the inevitable and are deciding how they’re getting to get a bit of the cryptocurrency pie.”
Pursuing self-serving objectives
The dynamic between actions and advice shows major disparities across the institutional landscape. The initial announcement of JPM releasing a stablecoin didn’t seem to return as a surprise to the cryptocurrency industry, while the thought of the banking sector getting curious about the crypto market doesn’t please everyone.
Arguments are ongoing about fragmentation and therefore the true intentions of institutions learning an interest in distributed ledger technology. a foreign objective might be to monopolize the mode of transaction and interoperability, giving institutions relevancy within the future digital asset economy.
It is also important to seem at how big financial regulators are viewing digital assets and cryptocurrency. Since 2015, ny State’s Department of monetary Services has approved 25 entities to interact in virtual currency commercial activity in ny state. during a quote to Cointelegraph, Superintendent Linda Lacewell of the ny State Department of monetary Services remarked, “DFS continues its commitment to fostering financial innovation in ny .”
So, while there’s a unbroken dichotomy between banks, regulators and crypto maximalists, the underlying technology is nonetheless considered valuable and transformative to our shared future.