Bitcoin may have the potential for substantial additional gains in the long run, as it competes with gold for investment flows, according to JPMorgan Chase & Co.
Bitcoin’s market capitalization of around $ 575 billion would have to increase 4.6 times – to a theoretical Bitcoin price of $ 146,000 – to match the total private sector investment in gold through exchange-traded funds or bars and coins, wrote strategists led by Nikolaos Panigirtzoglou in a note. But that outlook depends on Bitcoin’s volatility converging with that of gold to encourage more institutional investments, a process that will take some time, they said.
“Eliminating gold as an ‘alternative’ currency has a big advantage for Bitcoin in the long run,” wrote the strategists on Monday. However, “a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and, in our mind, it is a multi-year process. This implies that Bitcoin’s theoretical price target above $ 146,000 should be considered as a long-term goal and therefore an unsustainable price target for this year. “
Bitcoin fell 17% on Monday, the biggest drop since March, after breaking $ 34,000 for the first time over the weekend. The swings are a reminder of the famous volatility of the biggest cryptocurrency, whose price more than quadrupled last year.
More institutions and noticed Investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds in Bitcoin or said they are open to doing so. While some argue that the cryptocurrency offers protection against the weakness of the dollar and the risk of inflation in a world flooded with fiscal and monetary stimuli, others say that retail investors and trend-set amount funds are pumping an unsustainable bubble.
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For now, JPMorgan sees headwinds for the largest cryptocurrency, with indicators such as the accumulation of speculative long positions and an increase in investment portfolios containing small amounts of Bitcoin showing foam potential.
“The valuation and position landscape became much more challenging for Bitcoin at the beginning of the new year,” wrote the strategists. “While we cannot rule out the possibility that the current speculative craze will spread, further pushing Bitcoin’s price into the consensus region between $ 50,000 and $ 100,000, we believe that such price levels would prove unsustainable.”
Bitcoin rose 3.3% to $ 32,056 as of 12:40 pm in Tokyo, while the broader Bloomberg Galaxy Crypto Index advanced about 1.8%.
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