Bitcoin (BTC) gets a price call of $ 1 million – but there are risks

GUANGZHOU, China – According to one asset manager, Bitcoin could rise to $ 1 million in the long run to become a reserve currency for the world.

But JPMorgan has warned about the risks ahead as the cryptocurrency continues to rise.

Anthony Pompliano, co-founder and partner of Morgan Creek Digital Assets, said bitcoin could reach $ 500,000 by the end of the decade. It could eventually reach $ 1 million per coin, he added, without giving a timeline.

“I think bitcoin will eventually rise to the global reserve currency. I think bitcoin will eventually be much, much bigger than the gold market capitalization,” he said during the latest episode of CNBC’s podcast “Beyond the Valley.”

Meanwhile, global central banks have relaxed monetary policy – such as lowering interest rates and buying assets through so-called quantitative easing – to dampen the economy affected by the coronavirus pandemic.

“There were trillions of dollars being squeezed and injected into the economy, and everyone, from individuals to financial institutions and businesses, was running around the world looking for the best way to protect their purchasing power. They finally decided it was bitcoin. , “Pompliano said discussing what was behind bitcoin’s boom.

The bitcoin bull’s prediction that bitcoin could reach $ 1 million is based on several factors, including the scarcity of the cryptocurrency with a cap of 21 million coins, as well as the decentralized nature of the technology.

There is no central government like a central bank that controls bitcoin.

Instead, the so-called bitcoin network consists of miners who process transactions. These miners have a large variety of specialized computers needed to carry out the bitcoin mining process.

Since there are many different miners, no single entity can control the network. And because the computers they use are very powerful machines, bitcoin proponents claim that the network is one of the strongest computer networks in the world.

“As more and more people enter the market, there is more liquidity. As there is more liquidity, there is more utility. As there is more utility, there is more stability in the price … you get a kind of evolution, said Pompliano.

“If you think about the internet economy, there is no indigenous currency … (bitcoin) will eventually take its seat in the kingdom of the world’s reserve currency of the internet generation.”

In January, JPMorgan issued a note to customers setting a ‘theoretical’ long-term price target on bitcoin of $ 146,000 as bitcoin began to compete with gold.

Gold is generally accepted as a ‘safe haven’ asset to which investors flock in times of political strife or turmoil in the financial market. Bitcoin is now starting to develop such a reputation.

“Bitcoin competes with traditional gold, bitcoin is a form of digital gold,” Nikolaos Panigirtzoglou, JPMorgan’s world market strategist, told CNBC’s “Beyond the Valley”.

He said the value of privately owned gold for investment purposes alone is about $ 2.7 billion. To reach bitcoin’s market capitalization, it must fetch a price of about $ 146,000.

But there are caveats, the biggest one being the volatility in the price of bitcoin. The digital currency is known for wild fluctuations in price. Panigirtzoglou said bitcoin is “five times more volatile than gold.”

The key to the volatility of bitcoin with gold is institutional adoption, the JPMorgan strategist said.

“The faster the pace of institutional adoption, the faster confluence in volatility will occur,” he said.

There are still risks to the current rally. Although driven by institutional investors, retail participation was also high.

“The biggest risk is that the flow impulse we’ve seen in recent months is declining significantly from here,” Panigirtzoglou said.

“People especially go back to the office when the economies reopen, and they have less time to trade at home, and consequently slow down some of the retail … flow impulse from here,” he added.