- JPMorgan Asset Management has included bitcoin in its long-term capital market assumptions for the first time, projecting annualised returns of 10% over the next decade, ahead of its forecasts for stocks, bonds and gold.
- The risk assumption is what matters. The same base case assumes 55% annual volatility, more than three times that of US large-cap equities, which means the expected return per unit of risk is worse than equities on the bank’s own numbers even though the headline return is higher.
- JPMorgan draws that conclusion itself by declining to add bitcoin to its main portfolio models, citing unstable correlations with other assets. The team including Tim Lintern, Thushka Maharaj and Sean Daly wrote that it is premature to consider bitcoin a diversifier in a balanced portfolio.
- The volatility has a compounding cost the report highlights: steep losses require larger gains to recover. Investors who bought near the 2025 peak just above $126,000 saw holdings fall as much as 50%, and a 50% loss requires a 100% gain to break even.
What Happened?
The team added that should volatility continue to decline and correlations stabilise, the position may evolve, particularly as regulation becomes clearer and liquidity and price discovery improve. A tenth of clients recently surveyed said their portfolios held crypto and roughly 17% said they planned to prioritise it. The wider report forecasts a $15 trillion global capital expenditure supernova driven by economic nationalism, technology adoption and capital rewiring, with governments investing in national resiliency and breakthroughs expected across medicine, robotics and space as well as AI.
Why It Matters?
Capital market assumptions exist to build portfolios, and on JPMorgan’s own figures bitcoin fails the test these numbers are designed for. A 10% expected return against 55% volatility produces a lower return per unit of risk than equities at roughly a third the volatility, so the headline that bitcoin beats stocks holds only before adjusting for risk. The bank reaches the same conclusion by excluding it from its models, which is a more meaningful statement than the forecast itself. For advisers, this is a useful counterweight to arguments that bitcoin belongs in balanced portfolios alongside gold, including one published last week by an executive whose firm is building products for exactly that purpose. The correlation objection is the technically correct one and this month supports it. A diversifier requires stable, ideally low correlation with the rest of a portfolio. Bitcoin fell while gold rose during the risk-off session on October 15, then rose with equities during the rebound, and fell again when that reversed. Unstable correlation means the asset cannot be relied upon to behave any particular way when it matters, which is precisely the property a diversifier must have. Note also that gold has fallen more than 20% since the Iran war began, so neither asset has performed as haven theory predicts. On the wider forecast, a $15 trillion capital expenditure wave sits awkwardly beside Goldman Sachs traders writing last week that AI capital spending has likely peaked and the debate has moved to financing and returns on capital. One is a decade-long structural view and the other a near-term market judgement, and they can both be right, but readers holding AI exposure should notice that two major institutions are describing the same spending in opposite terms.
What Next?
JPMorgan has set out the conditions under which its view would change: declining volatility, stabilising correlations, clearer regulation and improved liquidity. Those are observable and worth tracking rather than waiting for an announcement. Watch whether realised volatility falls toward the 55% assumption or exceeds it. For advisers the practical point is that a client holding bitcoin on diversification grounds is holding it for a property the largest US bank’s asset manager says it does not currently have.
Affected Tickers and Coins: JPM, BTC, IBIT, GC
Source: Bloomberg
