Bitcoin (BTC) is getting a $ 1 million price call, but risks are ahead

GUANGZHOU, China – Bitcoin could rise to $ 1 million in the long run to become a reserve currency for the world, according to an asset manager.

But JPMorgan warned of the risks ahead as the cryptocurrency continues to soar.

Anthony Pompliano, co-founder and partner at Morgan Creek Digital Assets, said bitcoin could reach $ 500,000 by the end of the decade. It could eventually reach $ 1 million per coin, he added, without providing a timeline.

“I think bitcoin will eventually rise to become the global reserve currency. I think bitcoin will eventually be much bigger than the gold market,” he said on the latest episode of CNBC’s “Beyond the Valley” podcast.

Meanwhile, central banks worldwide have eased monetary policy – such as cutting interest rates and buying assets through the so-called quantitative easing program – to take the blow to economies hit by the coronavirus pandemic.

“There were trillions of dollars printed and injected into the economy and everyone from individuals to financial institutions and corporations ran around the world looking for the best way to protect their purchasing power. Ultimately, they decided it was bitcoin, Pompliano said as he discussed what was behind bitcoin’s rise.

The bitcoin bull’s prediction that bitcoin could reach $ 1 million is based on a number of factors, including the scarcity of the cryptocurrency with a cap of 21 million coins, as well as the decentralized nature of the technology.

There is no central authority like a central bank that controls bitcoin.

Instead, the so-called bitcoin network consists of miners who process transactions. These miners operate a wide variety of specialized computers required to run the bitcoin mining process.

Since there are many different miners, no single entity can manage the network. And because the computers they use are often very powerful machines, bitcoin advocates claim the network is one of the strongest computer networks in the world.

“As more and more people come into the market, the more liquidity. The more liquidity, the more utility. The more utility, the more stability in the price … you get some kind of evolution. said Pompliano.

“When you think about that internet economy, there is no home currency … (bitcoin) will eventually take that place in the kingdom of the internet generation’s global reserve currency.”

In January, JPMorgan issued a note to customers with a “theoretical” long-term bitcoin price target of $ 146,000 as bitcoin begins to compete with gold.

Gold is widely accepted as a “safe haven” to which investors turn in times of political strife or turmoil in the financial markets. Bitcoin is now starting to develop such a reputation.

“Bitcoin competes with traditional gold, bitcoin is a form of digital gold,” Nikolaos Panigirtzoglou, global market strategist at JPMorgan, told CNBC’s “Beyond the Valley.”

He said the value of gold held by the private sector, for investment purposes only, is approximately $ 2.7 trillion. To reach bitcoin’s market cap, it would need to hit a price of around $ 146,000.

But there are caveats, the biggest of which is the volatility in bitcoin’s price. The digital currency is known for its wild swings in price. Panigirtzoglou said bitcoin is “five times more volatile than gold.”

The key to bitcoin’s volatility converging with gold is institutional adoption, the JPMorgan strategist said.

“The faster the rate of institutional adoption, the faster that convergence in volatility will occur,” he said.

Still, there are risks to the current rally. Although it was driven by institutional investors, private equity participation was also high.

“The biggest risk is that the current momentum we’ve seen in recent months slows down significantly from here,” said Panigirtzoglou.

“Especially when the economies reopen, people go back to the office, they have less time to do business at home, and as a result, some of the retail momentum … slows down from here,” he added.