Bitcoin may have the potential for substantial further gains over the long term as it competes with gold for investment flows, according to JPMorgan Chase Co.
Bitcoins market capitalization of around 575 billion would have to rise by 4.6 times for a theoretical Bitcoin price of 146,000 to match the total private sector investment in gold via exchangetraded funds or bars and coins, strategists led by Nikolaos Panigirtzoglou wrote in a note. 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, they said.
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 above146,000 theoretical Bitcoin price target should be considered as a longterm target, and thus an unsustainable price target for this year.
Bitcoin slid as much as 17 on Monday, 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.
For now, JPMorgan sees headwinds for the largest cryptocurrency, with indicators like a buildup of speculative long positions and an increase in investment wallets holding…