According to JPMorgan Chase & Co. Bitcoin could have the long-term potential for significant further gains as it competes with gold for investment flows.
Bitcoin’s market cap of approximately $ 575 billion would need to increase 4.6 times – for a theoretical Bitcoin price of $ 146,000 – to match the private sector’s total investment in gold through exchange-traded funds or bars and coins, wrote strategists led by Nikolaos Panigirtzoglou. in a note. But those outlook depend on Bitcoin’s volatility and that of gold to encourage more institutional investment, a process that will take time, they said.
“A displacement of gold as an ‘alternative’ currency represents a major benefit to Bitcoin in the long run,” the strategists wrote on Monday. However, “a convergence of volatility between Bitcoin and gold is unlikely to take place anytime soon and, in our view, will take several years. This implies that the theoretical Bitcoin price target of over $ 146,000 should be considered a long-term target, and thus an unsustainable price target for this year. “
Bitcoin fell a whopping 17% Monday, the biggest drop since March, after crossing $ 34,000 for the first time over the weekend. The swings are a reminder of the famous volatility of the largest cryptocurrency, the price of which has more than quadrupled in the last year.
More settings and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating money to Bitcoin or have said they are open to it. While some argue that the cryptocurrency provides a hedge against dollar weakness and inflation risks in a world awash with fiscal and monetary stimulus, others say retail investors and trend-following quant funds are blowing up an unsustainable bubble.
Read more: JPMorgan Says Flows to Grayscale Trust Key to Bitcoin’s Outlook
For now, JPMorgan is seeing headwinds for the largest cryptocurrency, with indicators such as a build-up of speculative long positions and an increase in investment portfolios with small amounts of Bitcoin showing potential scum.
“The background of valuation and position has become a lot more challenging for Bitcoin at the start of the new year,” the strategists wrote. “While we cannot rule out the possibility that the current speculative mania will propagate and push Bitcoin price further towards the $ 50,000 – $ 100,000 consensus region, we believe such price levels would prove unsustainable.”
Bitcoin rose 3.3% to $ 32,056 from 12:40 PM in Tokyo, while the broader Bloomberg Galaxy Crypto Index was up about 1.8%.
Read more: Does Bitcoin Boom Mean ‘Better Gold’ or a Bigger Bubble? QuickTake