According to JPMorgan Chase & Co. Bitcoin has the potential to reach $146,000 in the long term as it competes with gold as an asset class.
Strategists led by Nikolaos Panigirtzoglou said that Bitcoin’s market capitalization of around $575 billion would have to rise by 4.6 times — for a theoretical price of $146,000 — to match the total private sector investment in gold via exchange-traded funds or bars and coins. 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.
“A crowding out of gold as an ‘alternative’ currency implies a big upside for Bitcoin over the long term.” However, “a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process,” the strategists wrote.
On Monday, Bitcoin slid as much as 17%, the biggest drop since March, after breaching $34,000 for the first time over the weekend. The swings are a reminder of the famed volatility of the largest cryptocurrency, whose price has more than quadrupled over the past year.
More institutions and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds into Bitcoin or have said they’re open to doing so. While some argue that the cryptocurrency offers a hedge against dollar weakness and inflation risk in a world awash with fiscal and monetary stimulus, others say retail investors and trend-following quant funds are pumping up an unsustainable bubble.