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According to JPMorgan Chase & Co., Bitcoin could have the potential for substantial additional earnings in the long run as it competes with gold for investment flows.
Bitcoin’s market capitalization of around $ 575 billion is expected to increase 4.6 times – for a theoretical Bitcoin price of $ 146,000 – to match the total private sector investment in gold through exchange-traded funds or bars and coins, wrote strategists led by Nikolaos Panigirtzoglou. in a note. But that outlook depends on Bitcoin’s volatility converging with that of gold to encourage more institutional investment, a process that will take time, they said.
“A foreclosure of gold as an ‘alternative’ currency means a big advantage for Bitcoin in the long run,” the strategists wrote on Monday. However, “a convergence of volatilities between Bitcoin and gold is unlikely to happen quickly and is in our minds a multi-year process. This implies that the theoretical Bitcoin price target of $ 146,000 above should be viewed as a long-term target, and therefore an unsustainable price target for this year.
Bitcoin slipped as much as 17% on Monday, the biggest drop since March, after crossing $ 34,000 for the first time over the weekend. The fluctuations are reminiscent of the famous volatility of the largest cryptocurrency, whose price has more than quadrupled in the past year.
More institutions and Noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds to Bitcoin or have expressed their willingness to do so. While some argue that cryptocurrency offers hedge against a weak dollar and inflation risk in a world awash with fiscal and monetary stimulus, others argue that retail investors and quantitative funds that follow the trends create an unbearable bubble.
Read more: JPMorgan Says Grayscale Trust Key Flows For Bitcoin Outlook
For now, JPMorgan sees headwinds for the larger cryptocurrency, with indicators like an accumulation of speculative long positions and an increase in investment portfolios containing small amounts of Bitcoin showing potential foam.
“The context for valuation and position has become much more difficult for Bitcoin at the start of the new year,” the strategists wrote. “While we cannot rule out the possibility that the current speculative mania will spread further, pushing the price of Bitcoin higher towards the consensus region between $ 50,000 and $ 100,000, we believe that such price levels are occurring. would prove to be untenable.
Bitcoin rose 3.3% to $ 32,056 at 12:40 p.m. in Tokyo, while the larger Bloomberg Galaxy Crypto Index rose about 1.8%.
Read more: Does Bitcoin Boom Mean Better Gold Or Bigger Bubble? QuickTake
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