It has been common for years to draw comparisons between Bitcoin (BTC) and gold’s position as a hedge for investors. Until now, these analogies have been greatly limited by the stark discrepancy in the total market capitalizations of the two assets. Gold continues to command roughly 4.6 times Bitcoin’s current $5.85 billion market capitalization, even after a major Bitcoin price increase in Dec. 2020.
According to cointelegraph.com, yet strategists at JPMorgan Chase, the American multinational megabank, are predicting a potential situation in which Bitcoin will take its predecessor seriously. A Bloomberg article quoted a note from the strategists of the bank, headed by Nikolaos Panigirtzoglou, on January 5, in which they proposed a path to the overall investment of the private sector in Bitcoin equaling the amount that is currently invested in gold by either exchange-traded funds or bars and coins.
“A crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin (BTC, +8.51%) over the long term,” strategists led by Nikolaos Panigirtzoglou wrote in a note on Monday. “Bitcoin’s [current] 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 exchange-traded funds or bars and coins.”
Analysts, however, suggested that for institutions to make substantial allocations, bitcoin’s price volatility has to decrease. JPMorgan stated that the stabilization of bitcoin and gold volatility is a multi-year process and indicates that the $146,000-plus objective is a long-term aim.
In 2020, Bitcoin rallied by 300 percent to $29,000 and expanded gains in the first three days of the new year to a new peak price of $34,420. In the last three months alone, the cryptocurrency has gained over 160 percent, supported by increased institutional involvement.If the crypto community expects the rally to proceed, JPMorgan sees signs of “speculative mania” and thinks that in the near term, more major increases into the $50,000-$100,000 range could be unsustainable.
