• Sun. Jun 23rd, 2024

JP Morgan Changes Prediction About Bitcoin’s Long Term Price

Phillip Seefeldt

ByPhillip Seefeldt

Apr 3, 2021

The US investment bank JPMorgan’s analysts have adjusted their long-term forecast of Bitcoin’s price to $130K down from the earlier $160K prediction. This adjustment was contained in a statement published by the bank on Friday. The statement acknowledges the increasing demand of Bitcoin, especially by institutional investors in recent weeks, courtesy of the decline in the majority of cryptocurrencies’ volatility. Not long ago, continuous large swings and volatility of Bitcoin’s price “slowed down adoption by more institutional investors.” The reduced volatility witnessed in recent weeks has attracted more institutions to the leading cryptocurrency JPMorgan started in its note.

Bitcoin becoming the true ‘digital gold’, says JP Morgan

In addition to the above factor, the bank’s analysts noted that the reference to Bitcoin as the “digital gold” keeps gathering impetus. For instance, since October last year, gold has suffered $20 billion in capital outflows, while Bitcoin has seen a rise of about $7 billion within the same timeframe.

According to JP Morgan’s analysts, if the inflow of funds into gold is taken into consideration, the recent massive outflow of funds from gold indicates a positive outlook for Bitcoin in the future. The researchers added that Bitcoin needs to climb to $130K to equate to the total private investment in gold.

In early January, it was widely published that JPMorgan predicted that Bitcoin would rise to $146K but must witness a substantial reduction in volatility before it can compete with gold regarding market value. Then, the Bitcoin market cap was $575 billion.

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JPMorgan predicted then that Bitcoin needed to rise by five times before it could reach the $2.7 trillion level of gold’s private sector investment meant. They added that a drop in the volatility would boost institutional investors’ confidence and encourage them to invest more in the asset. Institutions lay much emphasis on the volatility of an asset because high volatility indicates a high risk.

Confluence of Volatilities

But the decline in the price of gold from its high of $1,900 to $1,700 now has resulted in the downward review of Bitcoin’s price forecast, the researchers noted. At the beginning of the year, JPMorgan’s researchers predicted that Bitcoin would rise to as high as $146K, which they have now lowered to $130K.

The bank said that the fall in the price of gold has led to a drastic reduction in the positive outlook of Bitcoin as the digital gold and an investment alternative to traditonal gold when both are compared in terms of portfolio weight.

It is noteworthy that JPMorgan’s prediction was based on the expectation that Bitcoin’s volatility will reduce significantly and will eventually “converge” with gold’s price in the foreseeable future. Nevertheless, the leading digital asset still has a prospect to rise higher before the convergence with gold occurs.

Not long ago, Bitcoin’s three-month recorded volatility was 86% as against gold’s 16%. The researchers noted that convergence in Bitcoin and gold’s volatilities wouldn’t occur overnight; it might take several years to occur. This indicates that the $130K forecast of Bitcoin’s price can be regarded as a long-term outlook, according to JPMorgan.

Phillip Seefeldt

Phillip Seefeldt

Phillip Seefeldt is a skilled and perceptive news writer known for his comprehensive analysis and engaging writing style. With a commitment to accuracy and a deep understanding of current affairs, his articles provide readers with insightful perspectives and thought-provoking insights.

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