Digital currency bitcoin has emerged as a rival into gold and could trade as large as $146,000 if it becomes established as a safe-haven asset, investment bank JPMorgan (JPM) has said.
Interest from the world’s biggest cryptocurrency has jumped this year, with investors seeing bitcoin for a hedge against inflation and an alternative to the depreciating dollar. The rush led to bitcoin prices over tripling in the past six months to a record peak of $34,800 on January the 2nd.
“Bitcoin’s competition with gold has already started in our mind,” the Wall Street bank strategists said in a note, citing recent $7 billion outflows from gold and more than $3 billion of inflows in the Grayscale Bitcoin Trust.
That could mark a new dawn for the volatile digital money following years as a drama for speculators and retail punters.
Bitcoin is very likely to outshine gold since millennials become a more important component of the investment market over time and given their taste for “digital gold” over traditional bullion, JPM added.
With a market capitalisation of $575 billion, the bitcoin price would require a nearly fivefold jump to $146,000 to match the value of personal gold riches held in gold bars, coins or exchange-traded funds, the bank’s note added.
JPM strategists said the upside is conditional on the volatility of bitcoin converging with that of gold at the long run.
Although JPM sees the possibility of “current speculative mania” propelling bitcoin to between $50,000 and $100,000, it warned that such levels will prove unsustainable till its volatility levels out.
“We note that the spectacular bitcoin rally of the past few weeks has moved bitcoin into more challenging territory, not only in terms of its positioning backdrop, but also in terms of its valuation,” the bank said.
The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Thyagaraju Adinarayan. Editing by David Goodman.
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