Bitcoin is well-positioned to reach $146,000 in the long run, according to analysts at US bank JPMorgan Chase. This is possible due to the bitcoin’s similarity to gold as an asset class.
Bitcoin’s market capitalization, which reached $640 billion, should quadruple if the coin’s price grows to $146,000, to match the total private sector investment in gold via exchange-traded funds or bars and coins, strategists led by Nikolaos Panigirtzoglou wrote in a note. But this prediction depends on bitcoin volatility, which must correlate with gold volatility in order to stimulate more institutional investment.
“A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term,” the strategists wrote Monday. However, “a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.”
As of January 6, bitcoin is trading above $34,300, failing to hold positions above $36,300.
The current growth of bitcoin is associated with the arrival of institutional investors in the cryptocurrency market. In an interview with BBC World News, bitcoin billionaire and Galaxy Digital CEO Mike Novogratz pointed out the growing influence of institutional capital on cryptocurrencies. He explained that amid the pandemic and the economic crisis, world central banks are using quantitative easing policies and injecting additional cash into the economy. This accelerates inflation, which poses a threat to the stability of the financial sector. Such risks instill fears in investors and make them look for alternative hedging instruments. According to Novogratz, due to the influx of institutional money into cryptocurrencies, bitcoin will no longer be able to depreciate to zero, as large institutions that have bought coins will do their best to prevent the collapse of the leading cryptocurrency.