By Charles Abuede
A cryptocurrency analyst at JPMorgan Chase & Co has stated that Bitcoin has the potential to reach $146,000 in the long term as it competes with gold as an asset class.
This came after the digital currency slid to its biggest drop since March 2020 on Monday by 17 per cent, after it hit $34, 000 over the weekend for the first time.
Nikolaos Panigirtzoglou, analyst and strategist at JP Morgan Chase, said in a note that Bitcoin’s market capitalisation 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.
Nikolaos further stated that the outlook depends on the volatility of Bitcoin converging with that of gold to encourage more institutional investment in 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, 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,” revealed the JP Morgan analyst.
Conversely, the dangles in the digital currency are a reminder of the famed volatility of the largest cryptocurrency, whose value has more than quadrupled over the past year.
Similarly, more institutions and noted investors around the US markets have started apportioning funds into Bitcoin or have said they’re open to doing so. But while a number of individuals argue that the cryptocurrency offers a hedge against the weakness of the dollar and the attendant risk from inflation in a world saturated with fiscal and monetary stimulus, others say retail investors and trend-following quant funds are pumping up an indefensible bubble.
However, the JPMorgan strategist and analyst revealed that he sees headwinds for the largest cryptocurrency, with pointers like an upsurge of a speculative long position and an increase in investment wallets holding small amounts of Bitcoin showing potential bubbles.
“The valuation and position backdrop has become a lot more challenging for Bitcoin at the beginning of the New Year. While we cannot exclude the possibility that the current speculative mania will propagate further pushing the Bitcoin price up toward the consensus region of between $50,000 to $100,000, we believe that such price levels would prove unsustainable.”