Bitcoin holds “considerable” upside potential, writes JPMorgan.
JPMorgan Sees Value in Bitcoin
Slowly, then suddenly. That’s the narrative of the global cryptocurrency – specifically the Bitcoin market – over the past few months with several major companies exhibiting confidence in the premier cryptocurrency.
In August this year, As reported that Nasdaq-listed business intelligence software firm Microstrategy had purchased about 21,454 BTC worth over $250 million at the time as a reserve asset. Following the mammoth purchase, Microstrategy doubled down on BTC in September with another purchase of close to 16,796 BTC worth $175 million.
Famous Bitcoin proponent and Twitter CEO Jack Dorsey in October announced that his company, Square had purchased BTC worth $50 million. To date, it is estimated that over 600,000 BTC worth more than $6.75 billion is held by public companies the world over.
Now, once Bitcoin critic, JPMorgan has also exuded confidence in the world’s largest cryptocurrency by market cap, saying that although Bitcoin hasn’t quite proved itself as a safe haven yet, there’s still a “considerable” upside to the cryptocurrency.
In a note from JPMorgan’s Global Quantitative and Derivatives Strategy obtained by Coindesk, the authors noted that classifying bitcoin as a “risk” asset rather than a “safe” asset is “more appropriate” basis the leading cryptocurrency’s increased positive correlation with the S&P’s 500 index since March 2020.
The note mentions that Bitcoin’s function as a risk asset is “likely more of a reflection of a need for an ‘alternative’ currency rather than a need for a ‘safe’ asset or ‘hedge’.”
“To some extent, that is also true of gold.”
The authors add that Bitcoin’s role as a gold competitor could become more visible in the coming years as millennials continue to show confidence in cryptocurrencies as investment assets. The note foresees the inevitability of the younger investor demographic becoming “over time a more important component” of the Bitcoin investor universe.
Still a Long Way to Cover
Although the recent bitcoin price action shows strong bullish momentum, there’s still a long way to go for the top cryptocurrency if it aims to rival the centuries-old precious yellow metal.
For instance, the bitcoin market cap must increase by a factor of 10 for it to rival the total private sector investment in gold. The note authors added that “even a modest crowding out of gold as an alternative currency over the longer term would imply doubling or tripling of the bitcoin price from here.”
Recently, London stock exchange-listed company Mode Global Holdings PLC assigned 10% of their cash reserves to purchase bitcoin.