Cryptocurrencies deserve a place in diversified portfolios – JP Morgan

After a significant rally into the end of 2017, Bitcoin and other cryptocurrencies went into hibernation for a number of years. In 2020, however, cryptocurrencies have come roaring back, as concerns around elevated levels of government debt, currency debasement and inflation have all conspired to push the price of these assets back towards all-time highs. David Lebovitz, Global Market Strategist on the JP Morgan Asset Management Global Market Insights Strategy Team, believes that cryptocurrencies deserve a place in a portfolio.

Key quotes

“Part of what has made cryptocurrency so attractive in recent years has been this lack of centralization and oversight, as these currencies are regulated by the community that uses them, rather than a governing body like a central bank. At the same time, individuals continue to embrace cryptocurrencies like Bitcoin due to a fear that reckless government spending and elevated levels of debt will eventually render traditional fiat currencies worthless. While this is possible in a world of debt monetization, it does not necessarily seem probable; as such, we continue to view cryptocurrencies as speculative investments.”

“Cryptocurrencies should not be excluded from properly diversified portfolios. Rather, it requires a recognition that we are still learning about how these assets behave relative to traditional stocks and bonds. For investors who are comfortable taking on a bit more risk, an investment in cryptocurrency might be appropriate; that said, for those who view it as a panacea in a world of uncertainty and historically low-interest rates, a bit of caution may be warranted.”