According to JP Morgan, Bitcoin’s volatility has decreased in recent weeks, making the cryptocurrency more attractive to institutional investors. The investment bank has also revised its Bitcoin price target to $ 130,000.
Increased institutional acceptance, new price prediction for Bitcoin
JPMorgan said last week that Bitcoin’s price volatility has decreased in recent weeks, noting that this has made the cryptocurrency more attractive to institutional investors looking for low-correlation assets to diversify their investment portfolios.
Bitcoin’s high volatility has been one of the major obstacles to institutes adopting BTC, JPMorgan explained, adding that there are now signs that cryptocurrency volatility is normalizing.
“The recent change in the correlation structure of Bitcoin compared to traditional asset classes” is likely to increase institutional acceptance of Bitcoin, JPMorgan said. Based on the current gold price of USD 1,700 per troy ounce, the bank says: “Mechanically, the Bitcoin price should rise [to] $ 130,000 to cover total private sector investment in gold. “If bitcoin’s volatility continues to converge with gold’s volatility, the bank says its long-term price target would be $ 130,000, adding:
Given the level of financial investments in gold, such displacement of gold as an “alternative” currency means a big upward trend for Bitcoin in the long term.
The investment bank had previously predicted that the price of Bitcoin would hit $ 146,000 in the long term, but lowered its estimate as the price of gold recently fell from a high of $ 1,900 an ounce. “The decline in gold prices since then has mechanically diminished the estimated upside potential of Bitcoin as a digital alternative to traditional gold, provided it is offset against the portfolio weight of gold,” the bank said.
JPMorgan’s Bitcoin price target is based on the company’s expectation that the volatility of Bitcoin will converge with that of gold. However, this convergence will not happen in the near future, as the three-month realized volatility for Bitcoin was recently 86%, compared to just 16% for gold. The investment bank noted:
A convergence of volatilities between Bitcoin and gold is unlikely and likely a multi-year process. This implies that the theoretical Bitcoin price target of over $ 130,000 should be viewed as a long-term goal.
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