Investment firm JPMorgan Chase thinks that cryptocurrency Bitcoin can go up to $146,000 if it continues rising in value. In addition, Bitcoin is finally getting attention from Wall Street. Last Tuesday, BTC traded at $32,000. Then, by Wednesday morning, the cryptocurrency went up to $35,000.
JPMorgan Chase says that if Bitcoin continues to attract demand, prices can shoot to $146,000. Analysts noticed patterns that suggest a transfer of investment from gold to Bitcoin. They saw capital outflows from gold-pegged exchange-traded funds (ETFs) and inflows into Bitcoin trusts. This points to more investors recognizing Bitcoin as gold-like security. In fact, there is $3 billion worth of inflows into the Grayscale Bitcoin Trust. At the same time, there are more than $7 billion outflows from gold ETFs since October. As more investors pour their money into BTC, the price will keep pushing skyward.
4.6 times its Market Cap
To reach the $146,000 mark, BTC needs to increase its market cap value 4.6 times from its present $575 billion. The target price, amounting to $2.6 trillion, matches the “total private sector investment in gold via ETFs or bars and coins,” according to JPMorgan’s strategy team of Nikolaos Panigirtzoglou, Mika Inkinen, and Nishant Poddar. Reaching that theoretical target is a marathon and not a sprint. “A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term,” the strategists wrote.
However, the team warned that “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.” They added, “There is little doubt that this competition with gold as an ‘alternative’ currency will continue over the coming years given that millennials will become over time a more important component of investors’ universe and given their preference for ‘digital gold’ over traditional gold.” Given central banks printing money almost at will to contain a pandemic-fueled economic crisis, Bitcoin poses as an alternative investment. The researchers also said that they expect interest in bitcoin to come largely from younger investors.
The one major impediment to bitcoin’s price rise is its volatility. For example last Sunday, BTC shot up to $34,544.94, then went down to $28,700 early the next day. Five hours later, the cryptocurrency was trading up again at $32,100. Once Bitcoin gets over its volatility issues, the sky’s the limit for the crypto. The JPMorgan team noted that “this long term upside based on an equalization of the market cap of BTC to that of gold for investment purposes is conditional on the volatility of bitcoin converging to that of gold over the long term.”
JPMorgan warns of headwinds as the cryptocurrency faces speculative activity now that it’s rising fast. An increase in investment wallet holders with fractional investments plus long positions from speculators can increase the bubble size. The strategy team concluded that “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 BTC price up toward the consensus region of between $50,000-$100,000, we believe that such price levels would prove unsustainable.”
Outpacing Gold and the Stock Market
Investors have been attracted to the narrative that bitcoin could act as a store of wealth amid rampant central-bank money printing in the past year to bolster an economic recovery from the coronavirus pandemic. In 2020, bitcoin smashed its previous record highs, then continued upwards and crossed over the new year still shooting upwards. In the first few days of January, BTC already gained 12%. Meanwhile, gold gained 3%, while the Dow Jones, S&P 500, and Nasdaq gained less than 1% each.
Already, bitcoin already attracts some mainstream investors. Popular investors such as Paul Tudor Jones and Stanley Druckenmiller started trading in Bitcoin last year. Meanwhile, companies such as Paypal allow Bitcoin purchases on their platform. Also, alternative payment software Square lets users buy and sell bitcoins.
Watch the Yahoo Finance report where investment firm JPMorgan thinks that Bitcoin could surge to $146,000 in long term, but there is a lot of ‘ifs’:
Do you foresee BTC rising to $146,000 levels in the next few years? Plus, do you think it’s a good investment for the future? Let us know what you think about the popular cryptocurrency. Share your thoughts in the comments section below.