The price of bitcoin could rise above $146,000 over the long term, according to JPMorgan strategists.
In a note published Monday, strategists led by Nikolaos Panigirtzoglou wrote that bitcoin's competition with gold has already started and that implies a significant upside for bitcoin over the long term.
The strategists said gold exchange-traded funds (ETFs) have seen outflows of more than $7 billion since mid-October, while the Grayscale Bitcoin Trust (GBTC) has witnessed inflows of more than $3 billion. That suggests investors are preferring bitcoin over gold, and this trend will continue, according to the strategists.
"There is little doubt that this competition with gold as an 'alternative' currency will continue over the coming years given that millennials will become over time a more important component of investors' universe and given their preference for 'digital gold' over traditional gold," the strategists said.
"Private gold wealth is mostly stored via gold bars and coins the stock of which, excluding those held by central banks, amounts to 42,600 tonnes or $2.7tr including gold ETFs. Mechanically, the market cap of bitcoin at $575bn currently would have to rise by x4.6 from here, implying a theoretical bitcoin price of $146k, to match the total private sector investment in gold via ETFs or bars and coins."
But that outlook depends on bitcoin's volatility converging to that of gold over the long term, the strategists said. And that convergence is a "multi-year process," which implies that the "above $146k theoretical bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year."
As for this year, the strategists see headwinds for bitcoin, with indicators like a buildup of speculative long positions. "We believe that the valuation and position backdrop has become a lot more challenging for bitcoin at the beginning of the New Year. While we cannot exclude the possibility that the current speculative mania will propagate further pushing the bitcoin price up towards the consensus region of between $50k-$100k, we believe that such price levels would prove unsustainable."
Bitcoin's price has risen sharply in the last two weeks and is currently trading at around $31,445, according to tracker TradingView.
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