On Thursday, JPMorgan Chase said that the volatility of Bitcoin has recently dropped, which has laid a foundation for promoting the trend of financial institutions entering cryptocurrencies.
"The initial signs of normalization of bitcoin volatility are encouraging," several strategists such as Nikolaos Panigirtzoglou of JP Morgan Chase wrote in the report. "In our opinion, bitcoin volatility has normalized from the near future, which may help to re-stimulate institutions. Interest in the future of bitcoin."
The strategists wrote that bitcoin's three-month realized volatility rose to over 90% in February and has recently dropped to 86%. This makes the six-month volatility of Bitcoin stable at about 73%. Strategists say that as volatility decreases, more institutions may have a favorable impression on cryptocurrency.
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Bitcoin has achieved volatility in 3 months and 6 months
Previously, the volatility of Bitcoin has always made many financial institutions avoid it, because volatility has always been one of the key considerations in risk management-the higher the volatility of an asset, the higher the risk capital it consumes. At present, large banks in the United States do not provide direct use of Bitcoin and its corresponding currencies.
However, with the recent stabilization of Bitcoin, especially after it surged by 300% in 2020 and doubled again this year, traditional Wall Street institutions have become more and more interested in Bitcoin.
Goldman Sachs said this week that it is close to providing bitcoin and other digital asset investment tools to private wealth customers. Morgan Stanley also plans to provide three funds to high-net-worth clients to make them own cryptocurrencies. Bank of New York Mellon is developing a digital asset platform.
According to the strategist of JP Morgan Chase, in the past two quarters, the market's attention to Bitcoin has partly shifted from the gold market. They pointed out that over the past two quarters, $7 billion flowed into bitcoin-related funds, while $20 billion flowed out of gold ETFs.
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The flow of bitcoin funds and gold ETFs
JPMorgan strategist also said that the association structure between Bitcoin and other traditional assets has changed recently, which may further promote financial institutions to enter Bitcoin in the future.
They wrote that in recent months, the correlation between Bitcoin and traditional assets has declined, "making Bitcoin a more attractive choice for diversified asset portfolios. From the perspective of diversified investment, holding Bitcoin is also not easy to be affected by the further appreciation of the US dollar."