JP Morgan – Bitcoin Could Reach $146K, while Grabbing Gold’s Market Share
For years, crypto enthusiasts have been comparing Bitcoin (BTC) and gold in their efficiency to act as a hedge against risks. Till date, the sharp contrast in aggregate market cap of both assets has limited making parallels to a considerable level. Even after the recent rally, Bitcoin’s market cap of $585 billion is about 4.5x lower than the market cap of gold.
Still, analysts at the US multinational banking giant JP Morgan Chase are predicting a likely situation where Bitcoin can become a major competitor to gold. Specifically, a Bloomberg report pointed out a document published by JP Morgan analysts, headed by Nikolaos Panigirtzoglou, stating that the aggregate private sector investment in the numero uno crypto could match the amount invested in gold through exchange traded funds or coins and bars.
Despite the forecast, JP Morgan analysts have warned that the aforesaid scenario can happen only if Bitcoin’s volatility becomes comparable with that of gold and it could take considerable time.
“A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term […] 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.”
Bitcoin has been extremely volatile in recent times, with the price plunging to $27,700 on January 4, following by a sharp rebound to above $30,000 in a matter of hours. At the time of writing this article, Bitcoin was trading at $31,230. Yesterday’s decline was the sharpest since the crypto token breached the price level of $20,000 in December 2020.
Against the backdrop of consistent volatility, JP Morgan analysts, however, believe that there are robust favorable signals for the crypto such as an increase in net long positions, but cautioned that forecasting the trend in the medium-term is a complex task.
“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–$100,000, we believe that such price levels would prove unsustainable.”
On the first-day of the year, Bitcoin hit an all-time peak against the yellow metal, eclipsing its earlier peak recorded in December 2017 rally. Earlier this December, the same group of analysts, headed by Panigirtzoglou had forecast that Bitcoin could grab considerable market share from gold in the months ahead. Simply put, the analyst visualizes a huge change in stance in funds allocation by institutions in favor of the crypto.
In the meantime, volatility has fueled a sharp rise in trading volumes on top cryptocurrency exchanges. On January 4, the number one cryptocurrency exchange by trading volume, Binance, revealed that is daily trading volume has hit an all-time high of $80 billion.
Binance CEO Changpeng Zhao tweeted as follows:
“To put this in perspective, from Nov 15, 2017 to Dec 15, 2017, the month leading up to the ATH [all-time-high] in 2017, Binance did $20 billion in trading volume in 1 month.”
Similarly unexpected was the loss of $190 million, in one hour, booked by futures traders using Binance platform. It is the largest ever mass liquidation recorded so far on the platform.
$80+ billion in trading volume in the last 24 hrs on @Binance. ATH x 2!
We saw some scaling issues today. We probably will see more issues as we continue to grow. We aren’t prefect, but we will fix them as quickly as we can. We appreciate your understanding and support!🙏🙏🙏 pic.twitter.com/16A2DhWHqB
— CZ Binance (@cz_binance) January 4, 2021