JPMorgan is taking on a more bullish approach to bitcoin as the volatility of the digital currency continues to decline.
In an e-mail to its clients, the investment banking firm noted reductions in wild bitcoin price fluctuations could prompt higher interest from institutional investors. As a result, they could begin putting a portion of their cash reserves into the flagship cryptocurrency, a move that could lead its prices higher towards $130,000.
“These tentative signs of Bitcoin volatility normalization are encouraging… In our opinion, a potential normalization of Bitcoin volatility from here would likely help to reinvigorate the institutional interest going forward,”said Nikolaos Panigirtzoglou, a strategist at JPMorgan, in an interview to Bloomberg.
He added that bitcoin’s long-term volatility tends to converge with that of gold. It would further boost investors’ interest in the benchmark cryptocurrency. Gold, already a safe-haven asset among traditional investors, has slipped more than 16 percent from its record high established in August 2020. The same period witnessed the bitcoin price climbing by almost 400 percent.
Many investors believe Bitcoin would ultimately mousetrap a good portion of the $11 trillion gold market cap, with analyst PlanB anticipating as much as $288,000 valuation for the cryptocurrency in the coming years.
JPMorgan: Change of Heart?
JPMorgan’s pro-bitcoin analysis followed years of it badmouthing the cryptocurrency. The firm’s CEO Jamie Dimon once called Bitcoin a fraud, adding later that governments worldwide would “crush” it. Nevertheless, his attacks on Bitcoin reduced as the cryptocurrency survive two bearish phases followed by a flurry of institutional adoptions amid the coronavirus pandemic.
“I don’t personally understand the value of something that has no actual value,” Mr. Dimon said in one of his media interactions in 2018. “You all can do whatever you want; I don’t care.”
But JPMorgan started posting uplifting predictions beginning in 2020. Forbes reported that the banking giant is going “all in” after it decided to add Coinbase — one of the world’s leading cryptocurrency exchanges — as a client after denying services to crypto firms for years.
The bitcoin price saw an unprecedented high across 2020 despite a global market crash in March. Loose monetary policies and expansive government spending prompted institutional investors to look at cryptocurrency as their haven. Meanwhile, the US dollar, another safe-haven asset, closed 2020 down more than 13 percent.
In 2021, corporations including Tesla, MicroStrategy, and Square added/introduced Bitcoin to their balance sheets. Tesla went a step further and started accepting the cryptocurrency as payments for its electric vehicles. Meanwhile, PayPal, Bank of New York Mellon, Visa, and Mastercard added/decided to add crypto-enabled services to their legacy platforms.
At one point in time, Bitcoin was trading more than 1,500 percent higher from its mid-March low of $3,858 last year.