JP Morgan says that the volatility of bitcoin has decreased over the past few weeks, which has made the cryptocurrency more attractive to institutional investors. The investment bank also revised its bitcoin price target to $ 130,000.
Increased institutional adoption, forecast of new prices for Bitcoin
JPMorgan said last week that bitcoin’s price volatility has declined in recent weeks, pointing out that it has made the cryptocurrency more attractive to institutional investors looking for low-correlation assets to diversify their investment portfolios.
JPMorgan’s high volatility was one of the biggest obstacles to the acceptance of BTC by institutions, adding that it now sees signs that the volatility of the cryptocurrency is normalizing.
“The recent change in the correlation structure of bitcoin compared to traditional asset classes” is likely to increase the introduction of bitcoin, JPMorgan elaborated. Based on the current gold price of $ 1,700 per troy ounce, the bank says: “Mechanically, the bitcoin price will have to rise [to] $ 130,000 to match the total investment in gold in the private sector. If the volatility of bitcoin continues to coincide with the volatility of gold, the bank says its long-term price target will be $ 130,000, adding:
Considering how big the financial investment in gold is, it means that such a currency as an ‘alternative currency displacement’ is a big boost for bitcoin in the long run.
The investment bank previously predicted that the price of bitcoin would reach $ 146,000 in the long run, but lowered its estimate as the price of gold recently dropped from a high 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 the portfolio equilibrium of gold is leveled,” the bank explained.
JPMorgan’s bitcoin price target is based on the firm’s expectation that bitcoin’s volatility will coincide with gold. However, this convergence will not occur in the near future, as the three-month realization of volatility for bitcoin was recently 86%, compared to just 16% for gold. The investment bank noted:
A convergence in volatility between bitcoin and gold is unlikely to happen quickly and is likely to be a multi-year process. This implies that the above $ 130,000 theoretical bitcoin target should be considered as a long-term target.
What do you think of JPMorgan’s bitcoin forecast? Let us know in the comments below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for information 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 directly or indirectly responsible for any damage or loss caused or claimed to have been caused by or in connection with the use or reliance on any content, goods or services mentioned in this article.