Bitcoin and Gold have been parallel competitors for years. Even after Bitcoin price reached its peak value in December, Gold still continues to be 4.6 times Bitcoin’s current $5.85 billion market capitalization.
Yet strategists at JP Morgan are predicting a possible scenario where Bitcoin can be the predecessor. Today, Bloomberg quoted a note from the bank’s strategists which were led by Nikolaos Panigirtzoglou.
This note sketched a path to predict that investment in Bitcoin is coming to equal the value invested in gold through the exchange-traded funds or bars and coins. However, the path solely depends on Bitcoin’s volatility conglomerating with the precious metal. It is likely to take some 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.”
According to the reports from Cointelegraph, Bitcoin experienced highly volatile price action in recent days. Later, it sae a dive to almost $30,000. At the time of writing, Bitcoin is trading closer to $32,000. Yesterday’s plummet was the grossest since the coin crossed the $20,000 mark in December 2020.
Analyzing this persistent volatility, the JP Morgan strategists identified positive signs for the cryptocurrency to take speculative long positions. They also warned that reading the investment landscape in the medium-term will be difficult:
“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 Jan 1, 2021, Bitcoin reached it’s all time high surpassing its previous record in 2017 bull market. In December last year, the same team of strategists led by Panigirtzoglou suggested that Bitcoin may eat gold’s market share in the future. They forecasted that there will be a major shift in the institutional allocation towards the cryptocurrency.
An eventful trading climate has led volumes on major exchanges to reach its highest records. On Jan 4, Binance exchange reported an all-time highe of $80 billion in 24-hour trade activity. Zhao, Binance CEO tweeted,
“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”.