JPMorgan: Bitcoin has potential for 4.6x growth in the long term, but the key lies in whether the volatility converges.

According to Bloomberg, the U.S. banking giant JPMorgan Chase stated that Bitcoin is competing for investment funds with traditional store of value assets such as gold and fixed-income instruments. In the long term, Bitcoin could potentially increase in value by around 4.6 times (equivalent to Bitcoin reaching $146,000) in market capitalization.

JPMorgan's Bold Prediction

JPMorgan strategist Nikolaos Panigirtzoglou pointed out that the current market value of Bitcoin is around $575 billion. If it were to reach a level comparable to institutional investment in gold, there is approximately 4.6 times growth potential (equivalent to Bitcoin rising to $146,000).

JPMorgan thinks Bitcoin is heading to $146,000 in the long-term.

This would put $BTC valuation at 1/3 of gold. Quite realistic.

H/t @tracyalloway pic.twitter.com/rtrfAeF1nJ

— Joseph Young (@iamjosephyoung) January 5, 2021

Indeed, a $3 trillion market value estimate for Bitcoin doesn't seem crazy if it were to carve out market share from gold, fixed-income instruments, real estate, and other markets. However, the report suggests that this ideal scenario hinges on Bitcoin's volatility converging close to that of gold to encourage more institutional investment. Yet, this process might take a considerable amount of time.

"Squeezing out this 'alternative currency' from gold implies significant upside potential for Bitcoin in the long term. However, convergence of volatility between Bitcoin and gold is unlikely to happen in the short term. In our view, this will be a multi-year process. This means that under this theory, a Bitcoin price above $146,000 should be seen as a long-term target rather than a reasonable price target for this year."

Despite renowned traditional institutional investors like Paul Tudor Jones, Scott Minerd, and Stan Druckenmiller believing that in a global environment filled with fiscal and monetary stimulus measures, Bitcoin will become an asset class to hedge against a weak dollar and inflation risks, dissenting voices like David Rosenberg argue that retail investors and trend-following quant funds are exacerbating the current unsustainable bubble of Bitcoin.

Currently, JPMorgan sees the biggest resistance to Bitcoin's rise as the increase in speculative open interest contracts, coupled with a significant rise in the number of wallets holding small amounts of Bitcoin. These indicators show potential signs of a bubble. JPMorgan strategists stated:

"As the new year begins, the valuation and positioning backdrop for Bitcoin becomes more challenging. While we cannot rule out the possibility of the current speculative mania spreading further and pushing Bitcoin prices towards consensus levels ($50,000 to $100,000), we believe that such price levels would be difficult to sustain."