In competition with gold, Bitcoin has assets to attract institutional investors. In the long term, the value of crypto could reach $146,000. Under certain conditions, however, argues JPMorgan.
On January 5, for the first time, Bitcoin exceeded $35,000. This is its new all-time high. But probably not the last one. For Binance US CEO Catherine Coley, the cryptocurrency is likely to reach $75,000 to $100,000 by the end of the year.
JPMorgan also makes a prediction. The investment bank, formerly allergic to Bitcoin, estimates that in the long term, its value could be as high as $146,000. This scenario would only be possible by providing a real alternative to gold.
With a capitalization of approximately $600 billion, Bitcoin is far from competing today. The private sector investment in gold is equivalent to 2,700 billion dollars, says the American bank.
Bitcoin is not short of assets, however, to attract even more institutional investors. However, JPMorgan sets a condition for this and for its target price of 146,000 dollars. The problem is the volatility of the asset.
This volatility must be significantly reduced to encourage investors to invest significant amounts in Bitcoin. Because gold, by comparison, offers less fluctuation and therefore greater security.
“The reason is that, for most institutional investors, the volatility of each class is significant in terms of portfolio risk management, and the higher the volatility of an asset class, the higher the amount of venture capital consumed by that asset class,” JPMorgan explains.
To exceed $100,000 in the long term, Bitcoin would therefore need a volatility comparable to that of gold, the bank says in its note. However, volatility is precisely what allowed Bitcoin to earn more than 200% in 2020.
For many experts, such a convergence of volatility between gold and cryptocurrencies is therefore unlikely. However, this “drawback” does not totally hinder institutional investments.
JPMorgan points out that more than 3 billion dollars have been paid to the Grayscale Bitcoin Trust since mid-October. At the same time, gold ETFs lost $7 billion. As for the current volatility, it can also be explained by opportunistic profit-taking.
In December, the CEO of deVere Group sold 50% of his Bitcoin. It is “better to sell high and buy back in the lows”, he justifies. “Like me, many traders will sell at record prices. So we can expect some price declines in the short term,” he warns.
“But the longer-term price trajectory for Bitcoin is, I think, definitely on the upside,” concludes Nigel Green.