The price of bitcoin has been shooting up over these past few months. At press time, the currency is trading for well over $30,000, though it has fallen about $2,000 from its recent all-time high of about $33,000, and for analysts of JPMorgan, this is probably good news.
JPMorgan: A Six-Figure Price for Bitcoin Would Be Hard to Handle
The financial company has recently produced a report suggesting that if bitcoin were to strike six-figure territory, this wouldn’t be a good thing. Doesn’t that sound strange at first? Bitcoin hits $100,000, and we’re not supposed to be positive or happy about that? What could possibly be so bad?
The report says that while hitting such a number is certainly a possibility for the currency – especially considering how well it’s been doing as of late – this kind of jump would be “unsustainable,” and that the asset would ultimately incur a major correction soon after that. The report mentions:
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 $50,000 and $100,000, we believe that such price levels would be unsustainable.
2020 has long been considered the year in which bitcoin hit its peak. The currency shot up by more than 300 percent since the beginning of the year, largely due to newfound institutional support from companies such as MicroStrategy and Square. In addition, it appears the attitude towards crypto and bitcoin has changed somewhat in recent months.
Initially, bitcoin was viewed simply as a speculative asset worth investing in if one was willing to take a chance and lose their money. Now, it appears BTC is looked upon as a hedge tool of sorts; something that can protect one’s wealth during times of economic strife.
JPMorgan, however, states that while things are largely bullish for bitcoin, it would need to reach the market cap of gold if it’s ever going to be considered a worthwhile asset. For the most part, JPMorgan still lists bitcoin as an “alternative” currency that is largely moving up thanks to millennial activity. It’s market cap stands at $575 billion, which looks solid on paper, but still doesn’t quite compare with the $9 trillion of gold.
It Needs to Incur Too Many Changes
If bitcoin were to ever reach this level, one unit of the asset would have to be trading at roughly $146,000, according to the company’s report, and it would still need to be far less volatile than it is now, which JPMorgan doesn’t see happening right away. The document states:
It is thus unrealistic to expect that the allocations to bitcoin by institutional investors will match those of gold without a convergence in volatilities. A convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is, in our mind, a multi-year process.