Institutional support of Bitcoin and blockchain technology has sent the price of Bitcoin on a strong upward trajectory over the past few months. Despite the innate volatility of the cryptocurrency, the global adoption of the digital currency is spreading across all industries. JP Morgan Chase recently revealed in a note to Business Insider, that they anticipate Bitcoin rising to $130,000 if it were to reach the total private sector investment in gold.
JP Morgan has cautiously entered into the Bitcoin arena over the last few years, and despite delving into blockchain technology fairly early on, the banking giant recently compared Bitcoin to an “economic side-show”. Nonetheless, they have gone back on this statement by announcing they would be offering their clients a cryptocurrency exposure basket.
The demand for digital assets has never been higher, and as volatility decreases, greater numbers of institutional players will come on board. JP Morgan’s new price target for Bitcoin is based on the probability of Bitcoin reaching the total private sector investment of gold. JP Morgan commented on this:
“Mechanically, the Bitcoin price would have to rise [to] $130,000, to match the total private sector investment in gold… The decline in the gold price since then has mechanically reduced the estimated upside potential for bitcoin as a digital alternative to traditional gold, assuming an equalization with the portfolio weight of gold.”
The price target bases itself on the volatility of Bitcoin converging with gold’s. And while this is unlikely to happen soon, JP Morgan considers it a long term proposition.
“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,”
If this does happen, it will certainly impact the price of gold, already negatively affected by the rise in cryptocurrencies and the increase in investment in that sector.