JPMorgan: Bitcoin could surge to $146,000 in long term, but there is a lot of ‘ifs’
Bitcoin’s rise past the $ 30,000 mark has stunned Wall Street, and one of the largest US investment banks believes digital currency could have much more development..
In a note posted on Monday, JPMorgan set a bold long-term target for bitcoin’s price, saying the overclocked cryptocurrency could rise to $ 146,000 as it competes with gold as «alternative» currency. But there is a catch..
The market capitalization of Bitcoin, calculated by multiplying the price by the total number of coins in circulation, is currently over $ 575 billion. According to JPMorgan, Bitcoin needs to grow 4.6x to catch up with $ 2.7 trillion in private sector gold.
For the market value of bitcoin to reach this level, its price volatility needs to be substantially reduced so that institutional investors gain the confidence they need to make big deals. Bitcoin is known for its frantic volatility, and on Monday it plummeted below $ 30,000 just days after hitting that level..
Bitcoin surpassed the $ 35,000 mark this Wednesday morning, setting a new high, according to Coin Metrics..
«This long-term upside potential, based on equating the market cap of bitcoin with the capitalization of gold for investment purposes, depends on the volatility of bitcoin, converging with the volatility of gold over the long term.», – written by JPMorgan strategists.
«The reason is that for most institutional investors the volatility of each class matters in terms of portfolio risk management, and the higher the volatility of an asset class, the higher the risk capital consumed by that asset class.».
Crypto bulls say the recent Bitcoin rally is markedly different from the bubble at the end of 2017, when it approached $ 20,000 per coin and fell to $ 3,122 the following year. This is because institutional investors are starting to buy stocks and this is seen as a crucial factor in increasing confidence in digital assets..
Skeptics believe that Bitcoin’s rally in 2020, in which it rose more than 300%, is reminiscent of the tumultuous market activity in 2017. They see it as a speculative asset with no intrinsic value and as a bubble that might burst at some point..
However, according to JPMorgan, «there is no doubt that the momentum of institutional flow in bitcoin is what separates 2020 from 2017».
«The convergence of volatility between bitcoin and gold is unlikely to happen quickly and, in our opinion, is a multi-year process. This means that the aforementioned $ 146K theoretical Bitcoin price target should be seen as a long-term target and therefore an unsustainable price target for this year.».
Many institutional investors use investment vehicles such as Bitcoin Trust Grayscale as a means of buying this cryptocurrency. Grayscale Bitcoin Trust has received over $ 3 billion since mid-October, while gold ETFs have lost $ 7 billion, according to JPMorgan..
Some investors may find JPMorgan’s high bitcoin price target questionable. General director of the bank Jamie Dimon (Jamie Dimon) once named a cryptocurrency "fraud" and said that Bitcoin mania resembles the tulip craze in the 17th century.
However, Daimon is more supportive of the underlying blockchain technology that served as the basis for digital currencies like Bitcoin. JPMorgan has invested heavily in this space by creating its own digital currency called JPM Coin and establishing a new blockchain division.