In this photo illustration, visual representations of the digital cryptocurrency, Bitcoin are arranged on January 4, 2021 in Katwijk, the Netherlands.
Yuriko Nakao | Getty Images
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 future risks as the cryptocurrency continues to rise.
Anthony Pompliano, co-founder and partner at Morgan Creek Digital Assets, said bitcoin could reach $ 500,000 by the end of the decade. He could eventually reach $ 1 million a coin, he added, without giving a timeline.
“I think bitcoin will eventually grow to become the global reserve currency. I think bitcoin will eventually be much higher than the gold market ceiling,” he said during the last episode of the podcast “Beyond the Valley “on CNBC.
Why is the bitcoin rally?
Meanwhile, global central banks have eased monetary policy – such as lowering interest rates and buying assets through the so-called quantitative easing program – to help cushion the impact of the savings hit by the coronavirus pandemic.
“There have been billions of dollars that have been printed and injected into the economy and everyone, from individuals to financial institutions and corporations, has run around the world looking for the best way to protect their purchasing power, in the the latter decided it was bitcoin, “Pompliano said as he discussed what was behind bitcoin’s growth.
(Bitcoin) will eventually take its place in the realm of being the global reserve currency of the internet generation.
Anthony Pompliano
Morgan Creek digital assets
The prediction of the bitcoin bubble that bitcoin could reach $ 1 million is based on several factors, including the cryptocurrency deficit, which has a ceiling of 21 million coins, and the decentralized nature of the technology.
There is no central authority like a central bank to control Bitcoin.
Instead, the so-called bitcoin network consists of miners who process transactions. These miners operate a wide range of specialized computers needed to carry out the bitcoin extraction process.
Because there are so many different miners, no entity can control the network. And because the computers they use are often very powerful machines, bitcoin supporters claim that the network is one of the most powerful computer networks in the world.
“As more people enter the market, there is more liquidity. As there is more liquidity, there is more utility. As there is more utility, there is more price stability … you will get a kind of this evolution, “Pompliano said.
“If you think about that internet economy, there is no native currency … (bitcoin) will eventually take that place in the realm of being the global reserve currency of the internet generation.”
JPMorgan’s long-term price target for bitcoin
In January, JPMorgan released a note to customers, setting a long-term “theoretical” bitcoin price target of $ 146,000 as bitcoin begins to compete with gold.
Gold is generally accepted as a “safe haven” for investors in times of political conflict or financial market turmoil. 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, exclusively for investment purposes, is about $ 2.7 trillion. For the bitcoin market cap to reach this level, it should reach a price of about $ 146,000.
But there are warnings, the biggest being the volatility of the bitcoin price. Digital currency is known for wild price fluctuations. Panigirtzoglou said bitcoin was “five times more volatile than gold.”
The key to bitcoin’s volatility converging with gold is institutional adoption, said JPMorgan strategist.
“The faster the pace of institutional adoption, the faster the convergence in volatility will take place,” he said.
However, there are risks to the current rally. Although it was led by institutional investors, retail participation was also high.
“The biggest risk is that the momentum of the flow that we have seen in recent months will slow down significantly from here,” Panigirtzoglou said.
“Especially when economies reopen, people go back to the office, have less time to do home transactions, and as a result, some of that retail … the momentum of the flow slows down from here,” he added.