Bitcoin’s fantastic 2020 surge could be about to compete with gold as an “alternative” currency, JPMorgan admitted in a note to investors on Friday.
In Brief
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Bitcoin has ‘considerable’ upside potential according to JPM, which once derided bitcoin as a scam.
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Bitcoin’s relatively small market cap means upside potential is largely asymmetric.
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JPM expressed interest in various forms of crypto use-cases as the space matures.
Bitcoin has increased over 70% year-to-date, and this week’s PayPal bitcoin and crypto announcement can only be interpreted as a high-level endorsement of the ecosystem.
Earlier this month, Square acquired $50 million worth of bitcoin as it fully commits to bitcoin as a long-term investment.
Despite these major announcements though, bitcoin is still a relatively tiny asset class, with a total market capitalisation at just under $200 billion.
Millennials, who are entering the financial world now more than ever, are also more interested in bitcoin and digital assets than gold, per JPM.
According to JPMorgan, the physical gold market is worth $2.6 trillion, which includes assets held within gold ETFs.
In order for bitcoin to catch up to gold it would have to 10x its value from current levels – a modest estimation by most projections.
As reported by CoinDesk, JPM continued: “Even a modest crowding out of gold as an ‘alternative’ currency over the longer term would imply doubling or tripling of the bitcoin price.”
Over the long term, crypto could even be held for other reasons than being a store of wealth as gold is, according to JPMorgan.
“Cryptocurrencies derive value not only because they serve as stores of wealth but also due to their utility as means of payment. The more economic agents accept cryptocurrencies as a means of payment in the future, the higher their utility and value,” JPMorgan explained.
Simply put, the risk is to the upside for bitcoin. As we’ve covered consistently in our semi-weekly newsletter, bitcoin is the asymmetric bet of a lifetime and speaks to an upcoming total overhaul of the current financial system.
“The potential long-term upside for bitcoin is considerable as it competes more intensely with gold as an ‘alternative’ currency we believe, given that Millenials would become over time a more important component of investors’ universe,” JPMorgan concluded.
Additionally, bitcoin’s technical data is also pointing towards a continued phoenix-like rise in bitcoin as investors eye $14,000 as the next major hurdle.
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