JPMorgan View of Bitcoin Undergo Sea of Change
JP Morgan, which manages assets worth $316 billion, has forecast “considerable” upside for Bitcoin (BTC) in the long-term.
The latest positive posture towards the numero uno crypto has come soon after PayPal announced its plans to facilitate buying, selling and holding of cryptos including Bitcoin.
The primary criterion submitted by JPMorgan’s Global Markets Strategy division is Bitcoin’s contest with gold. The document, received by Business Insider, states:
“The potential long-term upside for bitcoin is considerable if it competes more intensely with gold as an ‘alternative’ currency we believe, given that Millenials would become over time a more important component of investors’ universe.”
The analysts also pointed out huge valuation gap between Bitcoin and gold. A minimum of $2.60 trillion is stated to be held in gold exchange-traded funds (ETFs) and bars. On the contrary, the market cap of Bitcoin stays at $240 billion.
JP Morgan’s document specifically stressed three vital reasons to back the long-term growth trend of Bitcoin.
Initially, Bitcoin has to gain 10x to equal the private sector’s investment in gold. Secondly, utility purpose of cryptos is very high. Finally, millennial could make long-term investments in Bitcoin.
With the integration of crypto purchases by PayPal and the quick rise in institutional needs, Bitcoin is gaining the reputation of a safe-haven asset.
There is a huge gap in the valuation of Bitcoin and gold. Although the latter has been acknowledged as a safe-haven asset for time immemorial, Bitcoin has several unique advantages. Analysts at JP Morgan said:
“Mechnically, the market cap of bitcoin would have to rise 10 times from here to match the total private sector investment in gold via ETFs or bars and coins.”
Utility is one of the benefits bitcoin has over gold. Being a blockchain network, users will be able to remit Bitcoin to another user of the public ledger in an efficient and easy manner. On the contrary, physical delivery of gold involves a need to manage logistics and safety issues:
JP Morgan, from “Bitcoin is a fraud and will blow up” in 2017 to “Bitcoin’s competition with gold” in 2020.
We’ve come a long way. pic.twitter.com/xceabkHaVJ
— Krüger (@krugermacro) October 24, 2020
As witnessed in several cold wallet transfers, it is simple to transfer $1 billion worth capital on the Bitcoin blockchain, in comparison to physical gold. The bank’s analysts further detailed:
“Cryptocurrencies derive value not only because they serve as stores of wealth but also due to their utility as means of payment. The more economic agents accept cryptocurrencies as a means of payment in the future, the higher their utility and value.”
With respect to framework, technical advancement and main stream adoption, Bitcoin is still in an infantry stage. Only 7% of the US residents had bought Bitcoin at least once.
Some of the well-developed markets, Canada for example, do not have an exchange that is well regulated. Traditional financial institutions and banks are yet to venture into the business of custodial services of crypto assets and that clears the way for Bitcoin’s growth over the next five to ten years.