Bitcoin could hit $146K long-term by ‘crowding out gold,’ says JPMorgan – 6 January 2021
Bitcoin could hit $146K long-term by ‘crowding out gold,’ says JPMorgan
Strategists at the American megabank believe the cryptocurrency has a chance to hit $146,000 in future years if it can evolve into a compelling alternative to gold.
Drawing parallels between Bitcoin (BTC) and gold’s role as a hedge for investors has been popular for years. Until now, the stark discrepancy in the total market capitalizations of the two assets has limited these analogies to a significant extent. Gold, even after a major Bitcoin price rise in Dec. 2020, continues to command roughly 4.6 times Bitcoin’s current $585 billion market capitalization.
Yet strategists at the American multinational megabank JPMorgan Chase are forecasting a possible scenario in which Bitcoin can seriously take on its predecessor. On Jan. 5, a Bloomberg report cited a note from the bank’s strategists, led by Nikolaos Panigirtzoglou, in which they sketched out a path to the total private sector investment in Bitcoin coming to equal the value that is currently invested in gold via either exchange-traded funds or bars and coins.
Yet such a path crucially depends on Bitcoin’s volatility converging with that of the precious metal, they stressed, and that is likely to take some time:
As Cointelegraph reported yesterday, Bitcoin has weathered a couple of days of choppy and highly volatile price action, with a brief dive down to $27,700 on Jan. 4 followed by a bounce to almost $30,000. As of press time, the coin is trading closer to $315,000. Yesterday’s plummet was the starkest since the coin recovered the $20,000 price point in December 2020.
Amid this backdrop of persistent volatility, the JPMorgan strategists nonetheless identified strong positive signs for the cryptocurrency — pointing to an accumulation of speculative long positions — yet warned that reading the investment landscape in the medium-term remains difficult:
Meanwhile, an eventful trading climate has caused volumes on major cryptocurrency exchanges to hit record highs. On Jan. 4, Binance, the world’s largest crypto exchange by trade volume, reported an all-time-high of $80 billion in 24-hour trade activity. “To put this in perspective, from Nov 15, 2017 to Dec 15, 2017, the month leading up to the ATH [all-time-high] in 2017, Binance did $20 billion in trading volume in 1 month,” the exchange’s CEO wrote on Twitter.
Equally unprecedented, however, was futures traders’ loss of a total of $190 million on Binance alone in just one hour, the largest value of a mass liquidation to date on the platform.
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Veteran Investor Bill Miller Calls Bitcoin a ‘Rat Poison,’ but for Cash
Investor Bill Miller, whose flagship mutual fund in 2020 beat the S&P 500 for the straight second year, said he believes bitcoin could replace cash and markets are underpricing inflation risk.
“Warren Buffett famously called bitcoin rat poison. He may well be right. Bitcoin could be rat poison, and the rat could be cash,” Miller noted in this Q4r market newsletter, adding that the cryptocurrency has many advantages over gold as an inflation hedge.
Legendary investor Buffett referred to bitcoin as “probably rat poison squared” and as a gambling instrument in 2018. However, several public listed companies such as MicroStrategy and Square diversified their cash holdings into bitcoin in the second half of 2020, boosting its appeal as a store of value.
Bitcoin has rallied by over 160% in the past three months and rose to record highs above $35,000 early Wednesday. The cryptocurrency’s market capitalization now stands at $670 billion, more than Berkshire Hathaway, the company Buffett helms.
According to Miller, the current relative trickle into bitcoin would become a torrent if more companies invest in the cryptocurrency, irrespective of inflation.
So far, the cost of living in the U.S. has remained well below the Federal Reserve’s 2% inflation target despite the central bank’s massive stimulus measures launched to counter the coronavirus-induced slowdown. However, Miller believes the market is likely “underestimating the risks of inflation.”
“Savings rates are unusually high and, as the economy becomes more “normal” in the second half of the year, it is likely that consumption will accelerate and, with it, money velocity. Lots of liquidity and increasing money velocity could quickly put upward pressure on inflation,” Miller noted.
The crypto community strongly believes that bitcoin is a better inflation hedge than gold, and the cryptocurrency could eventually replace the U.S. dollar as the global reserve currency. Analyst at JPMorgan said last month that the cryptocurrency’s growing popularity could have a bearing over gold’s price in the long run.
Bitcoin News Roundup for Jan. 6, 2021 – CoinDesk
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