JMP Securities has predicted that another $1.5 trillion of capital could be invested in bitcoin, more than the cryptocurrency’s current market capitalization. The company thinks more asset managers will follow Morgan Stanley’s lead and offer bitcoin to their clients. About $30 trillion in assets in the U.S. retail wealth management sector do not currently have direct access to bitcoin, he said.
$1.5 trillion could be invested in bitcoin, according to one analyst.
San Francisco-based financial services firm JMP Securities, which has offices across the country, said last week that Morgan Stanley’s decision to give its wealthy clients access to bitcoin was just the tip of the iceberg and could lead to $1.5 trillion being pumped into cryptocurrencies.
Devin Ryan is a managing director and equity research analyst for investment banks, brokers and asset managers at JMP Securities. He also heads the company’s business development department. The JMP Group is listed on the New York Stock Exchange under the symbol JMP.
Ryan said in an explanation to clients that Morgan Stanley’s announcement would serve as a catalyst for other banks to follow suit. Morgan Stanley said last week that it will soon give its wealthy clients access to three bitcoin funds, making it the first major bank to do so.
The analyst noted that about $30 trillion in assets in the U.S. retail wealth management industry do not currently have direct access to bitcoin, he said:
According to some assumptions, this would amount to $1.5 trillion of additional capital in bitcoin alone, more than the current market capitalization, for a relatively modest 5% of the asset portfolio.
At the time of writing, bitcoin had a price of $56,569, according to data from markets.Bitcoin.com. The cryptocurrency has a market capitalization of about $1.06 trillion. The price of BTC rose nearly 5% on Wednesday, helped by news that Elon Musk’s Tesla will accept bitcoin as payment without converting it to fiat currency.
Ryan’s 5% allocation to bitcoin is not unusual. This week, Jim Cramer, host of Mad Money, advised investors to reduce their gold positions and put 5% of their portfolio into bitcoin. Shark Tank star Kevin O’Leary also thinks a 5% allocation to bitcoin is optimal. Meanwhile, Jack Dorsey’s Square Inc. currently holds 5% of all bitcoin cash reserves.
According to Ryan, the motivations range from a missed opportunity to closing the business when customers decide there are better alternatives, which can have a negative impact on growth or competitiveness.
The analyst expects a similar trend among asset managers outside the US. It is seeing the rise of large pools of capital, driven by the same factors, although the dynamics vary by region, reports Business Insider. Ryan believes that the cryptocurrency industry is still in a very early stage of adoption:
The benchmarks we track are performing in line with expectations, both logically and overall, which we are very encouraged about.
What do you think of JMP Securities’ bitcoin forecast? Let us know your comments in the section below.
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