JPMorgan, the biggest bank in America, recently published an in-depth write-up renewing its forecast on bitcoin surging to highs of $146,000 in the long term.
And the piece resonated well with crypto fans, but not without a few warnings.
JPMorgan thinks a meteoric price rise is a possibility, but only if — a big If — Bitcoin’s volatility wanes and more institutions choose the popular digital currency over gold. For the record, $146,000 is nearly 130% above bitcoin’s current price of $63,000.
Going by JPMorgan’s assumptions, bitcoin and gold are always competing for investor’s attention, forcing them to choose which (between the two) can hedge against inflation (or better experience a price surge if inflation bites the value of the other assets).
Renewed interest in Bitcoin usage
Nikolaos Panigirtzoglou, JPMorgan’s strategist, said more investors have increasingly shown interest in bitcoin as a better hedge against inflation, especially with the “re-emergence of inflation concerns…during September/October 2021”.
He believes the renewed interest in bitcoin as an inflation hedge is triggered by gold’s lackluster efforts to respond to heightened inflation concerns. Currently, America’s inflation rate is at a 13-year high, and soaring even higher globally.
Panigirtzoglou has no doubt bitcoin will increasingly compete with gold, as more millennials continue to invest in cryptocurrency. “Considering how big the financial investment into gold is, any such crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin over the long term,”
And hence predicting a bitcoin price surge of $146,000 in the long term.
Bitcoin should first shed its huge volatility
But JPMorgan has a few caveats. That for bitcoin prices to soar at a staggering $146,000 in the future, the popular crypto coin should shed its massive volatility. Doing so will help investors feel comfortable adding bitcoin to their portfolios.
At the moment, bitcoin is nearly five times more volatile than gold — making it so risky to invest in digital currency (thanks to wild price swings). JPMorgan said unless bitcoin’s volatility reduces, institutions aren’t ready to invest in cryptocurrency anytime soon.
In another major caveat concerning the “theoretical” bitcoin price predictions, JPMorgan said bitcoin’s reputation (among institutions) dipped when its prices heavily plunged during April and May’s boom and bust.
Such wild price swings are a major sell-off even to the crypto market. And a stumbling block to sustainable price surges, especially for institutional investors.
While JPMorgan reckons bitcoin’s volatility is problematic, it admits the volatility levels are subtly falling and bitcoin’s prices might hit highs of $73,000 in 2022.
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