JPMorgan launches 'crypto exposure basket' featuring MicroStrategy as Wall Street interest in bitcoin grows

• JPMorgan’s new product will give buyers exposure to big bitcoin players like MicroStrategy and Square.
• It is a sign of growing interest in cryptocurrencies on Wall Street, with BlackRock and Goldman also moving in.
• JPMorgan’s product will also provide exposure to Riot Blockchain, Nvidia and PayPal.
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JPMorgan is launching a product to give investors exposure to cryptocurrencies, in the latest sign that bitcoin’s meteoric rise is drawing widespread interest on Wall Street.

An SEC filing on Tuesday by the bank showed it is creating a “basket of companies with exposure to cryptocurrency” that will be dominated by MicroStrategy, Square, Riot Blockchain and Nvidia.

MicroStrategy has over 90,000 bitcoins on its balance sheet, worth upwards of $4.9 billion based on Wednesday’s bitcoin price, while Square owns more than 8,000 bitcoins. Riot is focused on crypto mining, while Nvidia’s technology is commonly used in this activity.

The companies’ shares often move as the bitcoin price rises or falls. JPMorgan will create debt products linked to the performance of the crypto basket, giving investors indirect exposure to the cryptocurrency market.

However, JPMorgan’s filing stressed “the notes do not provide direct exposure to cryptocurrencies and the performance of the basket may not be correlated with the price of any particular cryptocurrency, such as bitcoin.”

MicroStrategy will make up 20% of the crypto exposure basket, Square 18%, Riot 15% and Nvidia 15%. PayPal, Advanced Micro Devices, and CME Group, which are all linked to bitcoin exchanging or mining, are also in the basket.

The notes – essentially fixed-income products that do not pay interest – will come in denominations of $1,000 and payments will become due in May 2022. There will be a deduction of 1.5% from any gains, in effect a fee.

So if the companies in the basket gained 20%, investors would receive 18.5% on a $1,000 investment, amounting to $1,185.

JPMorgan’s creation of a crypto basket is more evidence of the growing allure on Wall Street of bitcoin, which has climbed more than 80% in 2021.

Goldman Sachs is restarting its crypto trading desk, and found in an internal survey of nearly 300 clients that 40% had exposure to cryptocurrencies.

BlackRock, the world’s biggest asset manager, has said two of its funds can invest in bitcoin futures, while BNY Mellon has announced intentions to manage cryptocurrencies.

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