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JPMorgan Chase overweights Bitcoin: funds will continue to shift from gold to Bitcoin in the next few years
JPMorgan Chase stated that the bull market in Bitcoin is not over and will oversee more Bitcoin.
The investment bank Nikolaos Panigirtzoglou and other analysts said in a recent report that as Bitcoin in the mainstream financial market is getting more and more attention, the medium and long-term may continue to attract capital inflows, and all this is at the cost of gold facing capital outflows.
However, the bank said that this trend has not yet settled, Bitcoin still faces the risk of correction in the short term, and gold has a certain chance of recovery.
Short-term: Bitcoin may pull back, gold price rises
JPMorgan Chase said that it still believes that Bitcoin will be biased towards the downside in the short-term because the momentum signal is expected to continue to weaken in January next year, which may allow some traders with quantitative investment strategies such as CTA to further liquidate their positions to reduce risks.
The bank said that unless the Bitcoin price quickly resumes its upward trend and exceeds $20,000, the weakening trend of momentum signals may continue until the end of January.
On the contrary, momentum traders’ positions in gold show an upward trend in the short term.
Therefore, momentum traders seem to believe that Bitcoin is overbought relative to gold in the short term.
The current market price of Bitcoin is more than $18,000, and JP Morgan Chase estimates that its intrinsic value is in the range of approximately $11,000 to $12,000.
Mid-term: Bitcoin’s intrinsic value increases
However, JPMorgan Chase said that as time stretches to the medium term, as mining activities improve, the intrinsic value of Bitcoin is expected to increase significantly.
At present, the gap between the intrinsic value of Bitcoin and the market price is very large. At the end of 2017 and mid-2019, this gap has been significantly narrowed twice, mainly through the decline of market value. On the surface, it may mean that market prices will face resistance.
But JPMorgan Chase believes that there are key differences between the current situation and the previous two. The gap between the previous two mining costs and the bitcoin market price did stimulate mining farms to increase mining activities, and the increase in hash rate (calculation speed) has increased the difficulty of the algorithm, thereby pushing up the mining cost.
This time, the mine’s response was significantly lagging behind, partly due to the interruption of mining activities (power supply interruption) caused by Asian typhoons and heavy rainfall. JPMorgan Chase stated that as conditions return to normalization, the increase in mining activity may further increase the intrinsic value of Bitcoin.
The bank estimates that if other conditions remain unchanged, if the difficulty of mining increases by 70%, its intrinsic value will be close to the current market price. This increase is comparable to the end of 2017 and mid-2019.
Mid-to-long term: the continued shift of funds from gold to Bitcoin
In addition, JPMorgan Chase believes that the prospect of medium and long-term capital flows between Bitcoin and gold will show the opposite trend to short-term trends.
The bank said that the current institutional investors’ attention to Bitcoin has just begun, and most risk exposures are still zero, even if there are some high-net-worth investment institutions and family offices, the exposure is also very small; , Institutional investment in gold has a long history. This may mean that Bitcoin has more room to attract capital inflows than gold.
The cumulative asset management scale of the family office reached 6 trillion US dollars, while the current hot Bitcoin trust Grayscale Bitcoin Trust only slightly exceeded 10 billion US dollars, which is only 0.18% relative to the family office’s assets. , The ratio of gold ETF is 3%.
Therefore, JPMorgan Chase expects that in the medium and long term, the trend of institutional funds flowing into Bitcoin and flowing out of gold ETFs seen in the past two months may continue.
Since the beginning of October, Grayscale Bitcoin Trust has inflowed nearly 2 billion U.S. dollars in bitcoin funds, while gold ETFs have outflowed more than 7 billion U.S. dollars.
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