JP Morgan Chase & Co. JPM explored a hypothetical scenario in which Bitcoin‘S Bitcoin/USD market capitalization reaches parity with the presence of gold in investment portfolios.
What happened: According to the bank’s research, reaching such a milestone would bring Bitcoin’s market capitalization to $3.3 trillion, effectively more than doubling its current price, Coindesk reported.
However, the bank quickly tempered these expectations, citing the inherent risk and volatility associated with the cryptocurrency as significant impediments to this outcome.
The comparison between Bitcoin and gold arises from a common point of view among investors who consider Bitcoin as the digital counterpart of the traditional metal.
“Most investors take risk and volatility into account when allocating across asset classes and given volatility [Bitcoin] that’s about 3.7 times the volatility of gold which would be unrealistic to expect [Bitcoin] to match gold in investors’ portfolios in notional amounts,” he explained Nikolaos Panigirtzoglou and his team of analysts at JPMorgan.
Adjusting expectations to align Bitcoin’s market presence with gold in terms of “venture capital,” JPMorgan’s projections suggest a more modest market capitalization of $0.9 trillion for Bitcoin, which would translate into a price around $45,000 per unit.
This figure contrasts sharply with Bitcoin’s current price of around $67,400, indicating that Bitcoin’s allocation in investors’ portfolios may have already surpassed that of gold if adjusted for volatility.
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Because matter: The report further delved into the potential size of the Bitcoin ETF market, applying a volatility ratio of 3.7 to predict a market size of approximately $62 billion.
With current net inflows into spot Bitcoin ETFs at around $9 billion, some of this movement could be attributed to a shift away from existing investment vehicles towards ETFs.
“This is a realistic target in terms of potential spot size [Bitcoin] ETFs over time, perhaps within a two- to three-year period, although much of the implied net inflow could represent a continued rotational shift from existing instruments and locations to ETFs,” the JPMorgan report concludes, offering a look at the landscape in the evolution of cryptocurrency investments.
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