JPMorgan Chase & Co. is planning to launch a structured note offering tied to a basket of Bitcoin-friendly stocks for investors interested in trading cryptocurrencies, according to a filing with the Securities and Exchange Commission.
The Wall Street bank filed a proposal Tuesday for a new “cryptocurrency exposure basket” which would give investors exposure to 11 publicly-traded stocks involved in cryptocurrencies. The move adds another large industry player to a list of institutions slowly giving investors access to Bitcoin trading given there is no cryptocurrency backed ETF in the U.S.
The 11 stocks of U.S.-listed companies operate businesses that JPMorgan “believes to be directly or indirectly related to cryptocurrencies or other digital assets, including as a result of bitcoin holdings, cryptocurrency technology products, cryptocurrency mining products, digital payments or bitcoin trading,” according to the filing.
The weights of the stocks in the basket were determined based in part on each company’s exposure to Bitcoin and liquidity.
The debt instrument allocates 20% to MicroStrategy Incorporated and 18% to Square Inc. Also, cryptocurrency mining company Riot Blockchain Inc and cryptocurrency mining chip manufacturer NVIDIA Corporation were allocated 15% each. Together these stocks make up about 68% of the basket.
“We expect that generally the market value of your notes and your payment at maturity will depend to a greater extent on the performance of these four Reference Stocks,” JPMorgan wrote in the filing. The proposal document state the notes, maturing May 5, 2022, cost a minimum of $1,000 and investors will be charged a basket deduction — or fee — of 1.5%.
The filing is notable because it reveals another way institutional players are able to give their clients access to the thriving crypto market, which has a market cap at $1.7 trillion, according to CoinMarketCap. Bitcoin’s price has topped $57,000 this week.
Despite the extreme swings in price, demand from both retail and institutional investors is expected to propel the asset class to even further gains, according to analysts.
For example, Citibank analysts say that Bitcoin could top $318,000 by the end of this year. If institutional investors allocate just 1% of their funds into Bitcoin, the digital currency could top an astronomically high $500,000, according to a report by ARK Investment Management.
Some of finance's largest firms are starting to come on board.
BlackRock Inc. announced in January it is adding Bitcoin futures as an eligible investment to two funds, the first time the money manager is offering its clients exposure to cryptocurrency.
Likewise, Bank of New York Mellon announced its entry into Bitcoin in February with the formation of a new digital assets unit meant to develop a secure infrastructure for transferring, safekeeping and issuing digital assets.
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Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.
“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.
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