Cryptocurrency is edging ever closer to the mainstream as JPMorgan Chase’s new ‘exposure basket’ demonstrates.
As Yahoo Finance reports, the mega bank has created a Cryptocurrency Exposure Basket (CEB)—a structured note offering giving investors exposure to cryptocurrency via 11 Bitcoin proxy stocks.
The debt instrument contains an ‘unequally weighted’ basket of reference stocks which are—directly or indirectly—related to cryptocurrencies and other digital assets.
How CEB works
According to Forbes, the notes are due to mature on May 5, 2022. Costing a minimum of $1,000, investors must pay a fee—or basket deduction—of 1.5%.
The market value at maturity is dependent on the performance of four leading blockchain companies making up the lion’s share—68%—of the basket.
MicroStrategy weighs in with a 20% allocation of stocks. Square follows with 18%, while Riot Blockchain and NVIDIA Corporation each carry a 15% share.
As Forbes says, the US Securities and Exchange Commission has not yet approved an ETF (exchange-traded fund) backed by cryptocurrency. So, JPMorgan Chase is getting around regulations with its creation of a mutual type fund which eases investors into the crypto market in a more indirect way.
Risk-shy investors dip a crypto toe
This will certainly be a drawcard for some risk-averse investors to consider a dabble in the crypto and blockchain market.
However, some critics point to a rather loose connection with the blockchain sector. Forbes notes that coin offerings have little to do with the central business dealings of companies like Square and NVIDIA, along with PayPal and AMD—two other company allocations in the CEB.
For instance, AMD’s core business involves areas like AI, virtual reality and autonomous driving. The crypto link? Advanced computers use its chips to help develop blockchains and cryptocurrency mining.
With many financial advisors and investors barred from direct investment in bitcoin though, JPMorgan Chase’s CEB could prove to be a convenient entry into the crypto world.
The case for approving bitcoin ETF
Jack Tatar of Doyle Capital Management—also Forbes crypto advisor—points out that regulators have not yet permitted a bitcoin ETF in the US. Yet pressure is building up, with the US’s largest options exchange, Cboe, submitting its third bid for a bitcoin ETF this month.
Only last week, Goldman Sachs reintroduced its crypto trading desk, with clients lined up for imminent bitcoin futures dealing.
This could prove to be a big step towards cryptocurrency investment earning the trust of a wider audience.