Bitcoin's remarkable rise beyond $30,000 has stunned Wall Street, and one of America's largest investment banks believes the digital currency can continue to climb.
JPMorgan set a bold long-term price for bitcoin, claiming that the cryptocurrency could rise to $146,000 because it competes with gold as an alternative currency.
But there is a problem, with the market value of bitcoin — calculated by multiplying the price in the total number of coins in circulation — is currently more than $575 billion.
According to JPMorgan, it must rise 4.6 times to match the $2.7 trillion in private investment in gold.
For bitcoin's market value to reach this level, its price volatility must be significantly reduced to give institutional investors the confidence to make big bets.
The digital currency is notorious for its extreme volatility, falling sharply on Monday briefly to below $30,000 just days after it reached this level.
JPMorgan's strategic analysts wrote: This long-term bullish trend based on the market value equation of bitcoin versus gold for investment purposes is conditioned by bitcoin volatility with long-term gold volatility.
The current rise in bitcoin is markedly different from the late 2017 bubble, which brought it closer to $20,000, falling to $3,122 the following year, as investors began buying, and this is seen as an important boost to digital asset confidence.
Skeptics see the 2020 bitcoin rise — which has seen more than 300 percent progress — reminiscent of the 2017 market movement, and see it as a speculative asset of no fundamental value, and a bubble that is likely to burst at some point.
However, JPMorgan says: There is no doubt that the institutional flow to Bitcoin is what distinguishes 2020 from 2017, and it is unlikely that there will be a convergence of volatility between Bitcoin and gold quickly, and it will take several years.
"This means that the theoretical target price of bitcoin above $146,000 should be considered as a long-term target, and therefore an unsustainable price target for this year."
Many institutional investors use investment tools, such as the Grayscale Bitcoin Trust, as a means of buying digital currency.
According to JPMorgan, more than $3 billion has flowed into the Grayscale Bitcoin Trust since mid-October, while exchange-traded gold funds have fallen by $7 billion.
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