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After an unprecedented surge seen in the last two months of 2020, financial experts are debating what value can we expect Bitcoin to reach going forward. The most popular cryptocurrency is growing into a true competition for gold as an asset class and strategists at JPMorgan Chase & Co. expect that Bitcoin may reach a value of $146.000 in the long term.
Managing Director at J.P. Morgan and the leader of the team of strategists, Nikolaos Panigirtzoglou, noted that, in order to match the total amount of private investments in gold and a potential price of $146.000, Bitcoin will need to see a 4.6 times rise to its market capitalization which is in the neighborhood of $575 billion. However, we are still pretty far away from this development and this process is potentially going to play out over a long period of time.
The main reason for this is the volatile nature of the Bitcoin market which is still making institutional investors more comfortable in investing in gold positions.
The long term potential of Bitcoin lies exactly at its position as an alternative for gold in terms of being a hedge investment against the market uncertainty many are predicting over the next few years. Crowding out gold is the best possible avenue for Bitcoin to reach its full potential and presents the greatest upside of this cryptocurrency.
Still, the theoretical target of $146.000 is only a long-term target, and there’s practically zero chance of this happening in the next year.
Yesterday, Bitcoin breached the $40.000 barrier for the first time ever, but in another indication of its high volatility, Monday brought the biggest slide since March with the 17% drop. After quadrupling its price in a year, Bitcoin has again demonstrated its tendency to experience swift swings in value.
Over the last couple of months, several high-profile investors, including Stan Druckenmiller, Scott Minerd, or Paul Tudor Jones, have started buying into Bitcoin positions or at least announced their decision to make such investments.
With the newly-elected government, the United States is expected to enter a Covid-19 pandemic recovery program, which would include monetary stimulus packages likely leading to more money printing and resulting in high inflation over the next year.
The potential of Bitcoin as a hedge against inflation is the main motivation behind the latest moves from major Wall Street players, although some argue that retail investors and quant funds following trends are contributing to building an unsustainable bubble.
At the moment, JPMorgan is aware of plenty of obstacles lying ahead for the largest cryptocurrency, but still see a lot of potential due to the increase of long-term speculative positions and the growing number of small-amount investments wallets.
The movements at the start of 2021 make the future Bitcoin behavior much harder to predict, but the current speculative craze will most likely continue to drive up the value of the most popular cryptocurrencies.
Reaching the consensus value range of between $50,000-$100,000 is not out of the realm of possibility, but it will probably prove to be unsustainable, particularly in the shorter term.