Bitcoin can have the potential to earn substantially in the long run, as it competes with gold for investment flows, according to JPMorgan Chase & Co.
The market capitalization of Bitcoin of about $ 575 billion should increase 4.6 times – for a theoretical Bitcoin price of $ 146,000 – to match the total investment of the private sector in gold through funds traded on the stock exchange or bars and coins, wrote strategies led by Nikolaos Panigirtzoglou in a note. But that outlook depends on the volatility of Bitcoin converging with that of gold to encourage more institutional investment, a process that will take some time, they said.
“A gold rush as an ‘alternative’ currency means a big rise for Bitcoin in the long run,” strategists wrote on Monday. However, “a convergence of volatility between Bitcoin and gold is unlikely to happen quickly and is in our minds a multi-year process. This implies that the theoretical Bitcoin price target of over $ 146,000 should be considered a long-term target and therefore an unsustainable price target for this year. “
Bitcoin fell to 17% on Monday, the biggest drop since March, after first breaking $ 34,000 over the weekend. Swings are a reminder of the famous volatility of the largest cryptocurrency, whose price has more than quadrupled in the last year.
Several institutions and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds in Bitcoin or said they are willing to do so. While some argue that cryptocurrency provides hedging against the weakness of the dollar and the risk of inflation in a world full of fiscal and monetary incentives, others say retail investors and quantum funds following trends are pumping an unsustainable bubble.
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For now, JPMorgan sees the winds ahead for the largest cryptocurrency, with indicators such as the accumulation of long speculative positions and an increase in investment portfolios holding small amounts of Bitcoin that have potential foam.
“The valuation and position background became much more difficult for Bitcoin at the beginning of the New Year,” the strategists wrote. “While we can’t rule out the possibility of the current speculative mania spreading further pushing the price of Bitcoin up to the consensual region between $ 50,000 and $ 100,000, we believe that such price levels would prove unsustainable.”
Bitcoin rose 3.3% to $ 32,056 starting at 12:40 in Tokyo, while the broader Bloomberg Galaxy Crypto index advanced about 1.8%.
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