In this photographic illustration, the visual representations of the digital cryptocurrency Bitcoin are organized on January 4, 2021 in Katwijk, Netherlands.
Yuriko Nakao | Getty Images
GUANGZHOU, China – Bitcoin could reach $ 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 rise.
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 reach $ 1 million per coin, he added, without providing a timetable.
“I think bitcoin will eventually grow to become the global reserve currency. I think bitcoin will end up being much bigger than gold’s market capitalization,” he said during the last episode of CNBC’s “Beyond the Valley” podcast.
Why is bitcoin recovering?
Meanwhile, global central banks have been easing monetary policy – such as reducing interest rates and buying assets through the so-called quantitative easing program – to help cushion the blow to economies hit by the coronavirus pandemic.
“Trillions of dollars were 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, they finally decided it was bitcoin,” said Pompliano. discussed what was behind the rise of bitcoin.
(Bitcoin) will eventually occupy that place in the realm of being the global reserve currency of the Internet generation.
Anthony Pompliano
Morgan Creek digital assets
The bitcoin bull’s prediction that bitcoin could reach $ 1 million is based on a few factors, including the scarcity of cryptocurrency, which has a limit 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 is made up of miners who process transactions. These miners operate a wide range of specialized computers needed to carry out the bitcoin mining process.
As there are many different miners, no entity can control the network. And since the computers they use are often very powerful machines, bitcoin proponents claim that the network is one of the strongest computer networks in the world.
“As more and more people enter the market, there is more liquidity. The more liquidity, there is more use. The more use, there is more price stability … you can achieve this kind of evolution,” said Pompliano.
“If you think about the 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 long-term target price for bitcoin
In January, JPMorgan released a note to customers setting a long-term “theoretical” price target for $ 146,000 bitcoin as bitcoin starts to compete with gold.
Gold is widely accepted as a “safe haven” asset, where investors flock in times of political conflict or financial market turmoil. Bitcoin is now starting to develop that reputation.
“Bitcoin is competing with traditional gold, bitcoin is a form of digital gold,” said Nikolaos Panigirtzoglou, JPMorgan’s global market strategist, to CNBC’s “Beyond the Valley”.
He said the value of gold held by the private sector, solely for investment purposes, is around $ 2.7 trillion. For bitcoin’s market capitalization to achieve this, it would have to reach a price of around $ 146,000.
But there are caveats, the biggest one being bitcoin price volatility. The digital currency is known for great price fluctuations. Panigirtzoglou said bitcoin is “five times more volatile than gold”.
The key to the volatility of bitcoin converging on gold is institutional adoption, said the JPMorgan strategist.
“The faster the pace of institutional adoption, the faster the convergence in volatility will occur,” he said.
Still, there are risks ahead for the current rally. Although it has been driven by institutional investors, retail participation has also been high.
“The biggest risk is that the flow momentum we’ve seen in the past few months will decrease significantly from here,” said Panigirtzoglou.
“In particular, when economies reopen, people return to the office, have less time to trade at home, and as a result, a little bit of that, the momentum of the retail flow decreases from here,” he added.