Bitcoin BOMBSHELL: JPMorgan changes tune and says bitcoin-based ETFs are the ‘holy grail'

Date | 16-02-2018 - 12:38 PM Article Type | Stock Markets Region | World

US BANKING giant JPMorgan has changed its tune over bitcoin after telling its clients that a bitcoin-based exchange-traded fund (ETF) could be the “holy grail for owners and investors”.



JPMorgan Chase Chairman and CEO Jamie Dimon is famous for his outspoken views on bitcoin, and famously said, ”if you're stupid enough to buy it, you'll pay the price for it one day.”

However, one branch of his firm has now championed a form of Bitcoin-based investment vehicle as its view on cryptocurrencies evolves.

The JPMorgan report entitled “Decrypting Cryptocurrencies: Technology, Applications and Challenges,” says cryptocurrencies can help customers diversify their portfolios.

An ETF (exchange-traded fund) is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund.

Unlike mutual funds, an ETF trades like a common stock on a stock exchange and experience price changes throughout the day as they are bought and sold.


Daniele Bianchi, Assistant Professor of Finance at Warwick Business School, simplifies them as, “basically an investment vehicle that tracks the spot price of Bitcoin and works just like a standard ETF.”

In short, Bitcoin ETFs are a particular type of ETF that mimic Bitcoin’s price.

Benjamin Dives, CEO of London Block Exchange (LBX) says Bitcoin-linked ETFs are an alternative way of investing in cryptocurrency – except investors don't own the asset.

He said: “Instead, they're investing in a fund that owns the underlying asset – bitcoin - and will see their investment grow if the fund's holdings appreciate."

So is this, as JPMorgan claim, really the “holy grail for owners and investors”? Is a bitcoin-like product really ready for the capital markets?

Mr Dives said: "In some ways, they're similar to mutual funds.

"ETFs allow people to purchase shares of the fund during regular trading hours via a broker and, unlike mutual funds, the price can vary throughout the day.

"The share price is linked directly to the value of the fund’s holdings.

“Because it opens up the opportunity for both institutional and retail investors to invest in Bitcoin without actually holding the currency. This makes such an investment much more accessible and much less expensive.”

Mr Bianchi adds that JPMorgan’s move is a further step towards the "normalisation" of bitcoin and its legitimacy as an investment vehicle, which, he adds, remains ”highly speculative.”

He said: “There are still some good reasons why even seasoned investors are reluctant to get involved in direct investments relating to cryptocurrencies. "An actively traded ETF will allow people to invest in Bitcoin without actually buying them.”

Author: Heng V. Mony
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