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21 April 2021
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JPMorgan Defies Charlie Munger’s “Avoid Bitcoin” Advice, Suggests 1% Portfolio Exposure to BTC


JPMorgan has recently defied legendary investor Charlie Munger’s advice of “avoiding Bitcoin”. The Wall Street banking giant recently stated that investors should have 1% of their portfolio exposure to Bitcoin (BTC). The banking giant’s comments on the backdrop of its suggestion for portfolio diversification.

For a long time, strategists have seen Bitcoin as a potential hedge against global economic factors like inflation, stock fluctuations, commodities and bonds. But instead of going all-in into BTC, the banking giant suggests investors limiting their risks by pouring only 1% so that even if things go all the way south, they won’t be losing much of their hard-earned money. Note that most of the institutional players who have joined the Bitcoin market have also announced their exposure anywhere between 1-5%.

In a note to investors on Wednesday, accessed by Bloomberg, strategists including Joyce Chang and Amy Ho wrote:

“In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio”.

The stregists further added: “Cryptocurrencies are investment vehicles and not funding currencies. So when looking to hedge a macro event with a currency, we recommend a hedge through funding currencies like the yen or U.S. dollar instead.”

Charlie Munger Advices Users to Neither Buy Bitcoin or Gold

On Wednesday, during the annual meeting of shareholders of the Daily Journal Corporation in Los Angeles, legendary investor Charlie Munger and Berkshire Hathway’s vice-chairman advised investors neither to buy Bitcoin or gold.

Munger thinks that cryptocurrency is a highly volatile asset class and doesn’t serve well as a medium of exchange. Munger added:

“I don’t think bitcoin is going to end up the medium of exchange for the world. It’s too volatile to serve well as a medium of exchange. Bitcoin reminds me of what Oscar Wilde said about fox hunting. He said it’s the pursuit of the uneatable by the unspeakable.

It’s really kind of an artificial substitute for gold. And since I never buy any gold, I never buy any bitcoin, and I recommend other people follow my practice”, he added.

However, big market players have already entered Bitcoin and financial institutions have started showing an “insatiable thrust for BTC. Speaking to Bloomberg, Annabelle Huang, partner at Amber Group said: “Through the insatiable buy-side pressure from exchange-traded fund issuers, close-ended funds and large public corporations adding Bitcoin to their positions, demand is massively outstripping supply”.

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