JP Morgan, the largest U.S. bank by assets, has this year softened its previously harsh tone on bitcoin.
The bitcoin market has matured since JP Morgan chief executive Jamie Dimon called bitcoin a “fraud” in September 2017—helped by the (still highly volatile) bitcoin price finding support as an inflation hedge alongside gold this year.
Now, JP Morgan has said bitcoin’s strong 2020 could be set to continue, finding the bitcoin price has “considerable” upside in the long-term as it better competes with gold as an “alternative currency.”
“Even a modest crowding out of gold as an ‘alternative’ currency over the longer term would imply doubling or tripling of the bitcoin price,” JP Morgan analysts on the bank’s Global Quantitative and Derivatives Strategy team wrote in a note late last week, adding the “potential long-term upside for bitcoin is considerable” and pointing to Millennials becoming “a more important component of investors’ universe” as a potential catalyst.
Bitcoin’s reputation as “digital gold,” especially among Millennials and younger investors, has swelled this year, boosted by a number of high-profile investors adding bitcoin to their portfolios and talking up bitcoin’s prospects.
For bitcoin to catch up to gold’s $2.6 trillion market value the bitcoin price would have to increase 10-fold from its current $13,000 per bitcoin, the bank’s analysts noted.
Meanwhile, bitcoin was thrust into the headlines last week when payments giant PayPal
“Cryptocurrencies derive value not only because they serve as stores of wealth but also due to their utility as means of payment,” JP Morgan analysts added. “The more economic agents accept cryptocurrencies as a means of payment in the future, the higher their utility and value.”
However, the note also warned bitcoin “looks currently overbought for the near term,” suggesting bitcoin’s most recent surge higher, that’s seen it add over 20% through October, might be due for a correction.