Bitcoin is roaring into 2021 setting more records and flirting with a $34,000 price which has JPMorgan seeing more gains for the cryptocurrency, perhaps in the “long-term” reaching the $146,000 level, as it takes some of the shine out of gold.
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“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,” wrote the team at JPMorgan led by Nikolaos Panigirtzoglou.
However, investors should take note the "long-term" forecast is described as what could be a "multi-year process" as "a convergence in volatilities between bitcoin and gold is unlikely to happen quickly," the firm detailed.
TickerSecurityLastChangeChange %GLDSPDR GOLD SHARES TRUST – EUR ACC178.81-4.05-2.21%Powered by
“But this long term upside based on an equalization of the market cap of bitcoin to that of gold for investment purposes is conditional on the volatility of bitcoin converging to that of gold over the long term,” the firm added.
Bitcoin, which rocketed in 2017 and was practically left for dead when it collapsed in 2018, saw a renaissance in 2020 rallying 305% to a record $29,111.
The change of heart came as institutional money, from the likes of Mass Mutual and Fidelity, are giving the currency legitimacy.
“There is little doubt that the institutional flow impulse into bitcoin is what distinguishes 2020 from 2017,” JPMorgan noted while cautioning these investments do carry some risk.“We believe that a significant component of last year’s institutional flows into bitcoin reflect speculative investors seeking to front-run other more real-money institutional investors.”
In addition, corporate adoption from the likes of PayPal and Visa are also helping buoy the currency. Another financial payments firm, Square, a Jack Dorsey company, invested $50 million in bitcoin last year. Earlier this week, he publicly opposed proposed regulation for the crypto.
Still, many including First Trust Advisors’ chief economist Brian Wesbury are not buying into all the hype full throttle due to bitcoin’s extreme volatility.
“Can you pay your taxes in bitcoin? Can you buy anything you want with bitcoin? That’s what has to happen for you to have a true currency out of some cryptocurrency, it’s a long way away from that,” he noted.