JP Morgan says that bitcoin’s volatility has decreased in recent weeks, making the cryptocurrency more appealing to institutional investors. The investment bank has also revised its bitcoin price target to $130,000.
Increased Institutional Adoption, New Price Prediction for Bitcoin
JPMorgan said last week that bitcoin’s price volatility has been declining in recent weeks, noting that this has made the cryptocurrency more appealing to institutional investors seeking low-correlation assets to diversify their investment portfolios.
Bitcoin’s high volatility has been one of the biggest barriers to BTC adoption by institutions, JPMorgan explained, adding that it now sees signs that the cryptocurrency’s volatility is normalizing.
“The recent change in the correlation structure of bitcoin relative to traditional asset classes” will likely increase the institutional adoption of bitcoin, JPMorgan elaborated. Based on the current gold price of $1,700 per troy ounce, the bank says, “Mechanically, the bitcoin price would have to rise [to] $130,000, to match the total private sector investment in gold.” If bitcoin’s volatility continues to converge with gold’s volatility, the bank says its long-term price target would be $130K, adding:
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.
The investment bank previously predicted that the price of bitcoin would reach $146,000 in the long term, but lowered its estimate as the price of gold fell recently from a peak of $1,900 per troy ounce. “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 bank explained.
JPMorgan’s bitcoin price target is based on the firm’s expectation that bitcoin’s volatility will converge with gold’s. However, this convergence will not happen in the near future, as the three-month realized volatility for bitcoin recently stood at 86%, versus just 16% for gold. The investment bank noted:
A convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is likely a multi-year process. This implies that the above $130,000 theoretical bitcoin price target should be considered as a long-term target.
What do you think about JPMorgan’s bitcoin prediction? Let us know in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
Read disclaimer
The Wall Street Journal: Senate parliamentarian opens door for more Democratic bills to pass
WASHINGTON — The Senate’s nonpartisan parliamentarian Monday ruled in favor of a Democratic effort to pass additional legislation through a process called reconciliation, according to a spokesman for Senate Majority Leader Chuck Schumer, D-N.Y., opening the door for Democrats to approve more measures along party lines in the Senate this year. Democrats have used reconciliation once […]