Bitcoin‘s remarkable rise beyond $ 30,000 has stunned Wall Street, and one of the largest American investment banks believes that digital currency can continue to rise.
JPMorgan set a bold long-term rate for Bitcoin, claiming that the cryptocurrency could rise to $ 146,000 because it competes with gold as an alternative currency.
But there is a problem. Bitcoin’s market cap – calculated by multiplying the price by the total number of coins in circulation – is currently more than $ 575 billion.
According to JPMorgan, it should rise 4.6 times to match the $ 2.7 trillion of private sector investment in gold.
For Bitcoin’s market value to reach this level, its price volatility would have to be drastically reduced to give institutional investors the confidence required to make big bets.
The digital currency is known for its extreme volatility, as on Monday it fell sharply to below $ 30,000, just days after it reached this level.
Strategists at JPMorgan write: This long-term bullish trend based on the equation of Bitcoin’s market value against gold for investment purposes is conditional on bitcoin’s volatility along with gold’s long-term volatility.
The current rally of Bitcoin is noticeably different from the bubble in late 2017 that brought it close to $ 20,000, to $ 3,122 the following year, because investors started buying, and this is seen as an important confidence boost for the digital asset.
Skeptics see Bitcoin’s 2020 rally – which saw more than 300 percent progress – reminiscent of the 2017 market movement, and they see it as a speculative asset with no intrinsic value, as it is a bubble that is likely to burst at some point.
However, JPMorgan says: There is no doubt that the institutional flow to Bitcoin is what differentiates 2020 from 2017, and the fluctuations between Bitcoin and gold are unlikely to converge quickly and take several years.
He added: This means that the theoretical target price for Bitcoin above $ 146,000 should be considered a long-term goal, and therefore an unsustainable price target for this year.
Many institutional investors use investment tools, such as the Grayscale Bitcoin Trust, as a way to purchase digital currency.
According to JPMorgan, more than $ 3 billion has flowed into the Grayscale Bitcoin Trust since mid-October while gold ETFs have fallen $ 7 billion.