Cryptocurrencies: Bitcoin volatility decline paves way for banks, others ─JPMorgan

*JPMorgan Chase & Co states signs of Bitcoin volatility normalisation are encouraging, as the three-month, six-month realised volatility for coin has fallen

Emmanuel Akosile | ConsumerConnect

Against the backdrop of the recent pullback in Bitcoin’s volatility, JPMorgan Chase & Co. has said that the stage appears set for a trend that could encourage financial institutions to dive in.

Nikolaos Panigirtzoglou, one of the market strategists, wrote in an e-mailed report Thursday, April 1, that “these tentative signs of Bitcoin volatility normalisation are encouraging.

“In our opinion, a potential normalisation of Bitcoin volatility from here would likely help to reinvigorate the institutional interest going forward.”

It was gathered that the three-month realised volatility for the cryptocurrency has fallen to 86%, after rising above 90% February 2021.

The strategists opined that the six-month measure appears to be stabilising at around 73%.

As volatility subsides, a greater number of institutions could warm to the crypto space, they said.

The strategists also noted that the coin’s volatility has kept several institutions away, something that’s been a key consideration for risk management ─the higher the volatility of an asset, the higher the risk capital consumed by it.

None of the biggest banks in the United States (US) right now provide direct access to Bitcoin and its counterparts, report said.

However, traditional Wall Street firms have been taking a greater interest in the coin, especially after it doubled this year on the heels of a 300% jump in the last year.

Goldman Sachs Group Inc. said this week it’s close to offering investment vehicles for Bitcoin and other digital assets to private wealth clients.

Morgan Stanley plans to give rich clients access to three funds that will enable ownership of crypto and Bank of New York Mellon Corporation is developing a platform for traditional and digital assets.

Some of the attention on Bitcoin over the past two quarters has come at the expense of gold, JPMorgan’s strategists said, citing $7 billion of inflows into Bitcoin funds and $20 billion of outflows from exchange-traded funds tracking the precious metal.

Meanwhile, an additional boost to future adoption by institutions could arise from recent changes in Bitcoin’s correlation structure relative to other traditional assets, according to JPMorgan strategists.

They wrote that these correlations have shifted lower in recent months, thereby “making Bitcoin a more attractive option for multi-asset portfolios for diversification point of view and less vulnerable to any further appreciation in the dollar.”

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