JPMorgan: The Drop in Bitcoin Volatility to ‘Reinvigorate’ the Institutional Interest

Over the last six months, Bitcoin traction has been at the expense of gold, as $7 billion of inflows into Bitcoin funds coincide with $20 billion of outflows from gold exchange-traded funds (ETFs).


JPMorgan Chase says the recent pullback in Bitcoin’s volatility could bring a herd of institutions.

“These tentative signs of Bitcoin volatility normalization are encouraging,” strategists including Nikolaos Panigirtzoglou wrote in a report this week.

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

The three-month realized volatility for the leading cryptocurrency has taken a drop to 86%, which was above 90% in February. The six-month volatility, meanwhile, is stabilizing around 73%.

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

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JPMorgan strategists wrote that it had been Bitcoin’s volatility that has kept institutions away as the higher the volatility of an asset, the higher the risk of capital invested in it.

While none of the biggest US banks provide direct access to Bitcoin or other digital assets, Goldman Sachs and Morgan Stanley will begin to offer exposure to cryptocurrencies to their wealthy clients in the coming weeks. BNY Mellon, meanwhile, has already announced custody and transfer of digital assets.

Over the past quarters, some of the attention Bitcoin has been getting has been at the expense of gold, as per JPMorgan’s strategists who cited $7 billion of inflows into Bitcoin funds and $20 billion of outflows from exchange-traded funds (ETFs) tracking the precious metal.

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Bitcoin adoption by institutions could see an additional boost from recent changes in the leading cryptocurrency's correlation to traditional assets.

This correlation has shifted lower in recent months, “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,” wrote JPMorgan strategists.

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