JPMorgan research analysts have said that institutional investors are swapping Bitcoin for gold for the first time in six months. This is after crypto, including Bitcoin, took a major tumble dropping to lows just above $30,000.
Earlier this year, JPMorgan analysts updated a Bitcoin price target to $130,000. According to Business Insider, they said that Bitcoin would need to reach that target price “to match the total private sector investment in gold.”
However, the investment bank warned that “a convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is likely a multi-year process” making the $130,000 price a long-term target.
Since then, JPMorgan has taken steps to support Bitcoin and help its institutional investors access the cryptocurrency. According to CNBC, CEO Jamie Dimon has said that “clients are interested, and I don’t tell clients what to do” and that JPMorgan would help them buy Bitcoin if the clients wanted to.
Dimon, who has previously called Bitcoin a fraud before saying he regretted the comment, prefaced his support of JPMorgan helping clients buy Bitcoin by saying that he is “not a bitcoin supporter”. Nonetheless, support from the world’s largest bank by market cap would be valuable for Bitcoin.
JPMorgan says institutional investors are leaving Bitcoin for gold
Many supporters of Bitcoin have long argued that Bitcoin is digital gold. However, according to JPMorgan’s research, institutional investors are swapping digital gold for traditional gold. This is at a time where Bitcoin has fallen to lows at almost half the price of its peak.
After reaching heights of over $60,000, Bitcoin is still under $40,000 after a slight uptick in price. Bitcoin futures markets have also seen significant liquidation while gold ETFs have seen rising inflow.
As a result of this, JPMorgan stated that the current fair value price for Bitcoin would be $35,000 based on the volatility ratio between Bitcoin and gold.
Inflation-driven investment can lead to growth for Bitcoin
Rising inflation has led many institutional investors to look for safer assets. Bitcoin has often been described as a hedge against the US Dollar while gold is the traditional asset for those trying to escape USD inflation.
Although institutional investors seem to be favoring the latter at the moment, Bitcoin stands to gain from younger investors who prefer Bitcoin to gold. If USD inflation does not decrease, Bitcoin could quickly become the preferred asset for those younger investors trying to avoid decreasing currency value.