JPMorgan, the $ 316 billion investment banking giant, said the long-term upside potential for Bitcoin (BTC) was “considerable.” This new bullish stance on the dominant cryptocurrency comes after PayPal allowed its users to buy and sell crypto assets.
JP Morgan, from “Bitcoin is a fraud and will explode” in 2017 to “Bitcoin’s competition with gold” in 2020.
We have come a long way. pic.twitter.com/xceabkHaVJ
– Krüger (@krugermacro) October 24, 2020
The main factor highlighted by JPMorgan’s Global Markets Strategy division is Bitcoin’s competition with gold. The rating, obtained by Business Insider, reads as follows:
“Bitcoin’s potential long-term benefit is considerable if it competes more intensely with gold as an ‘alternative’ currency, in our view, as Millennials would over time become a larger component of the currency. investor universe. “
Analysts have also highlighted the large valuation gap between Bitcoin and gold. At least $ 2.6 trillion would be stored in exchange traded funds (ETFs) and gold bullion. In contrast, BTC’s market cap remains at $ 240 billion.
JPMorgan hints at three major reasons for a BTC bull
JPMorgan’s memo essentially highlighted three major reasons to support Bitcoin’s long-term growth potential.
First, Bitcoin must increase 10 times to match the private sector gold investment. Second, cryptocurrencies have great utility. Third, BTC could appeal to millennials in the longer run.
Following the integration of crypto purchases by PayPal and the rapid increase in institutional demand, Bitcoin is increasingly seen as a safe haven asset.
There is a huge difference in the valuation of gold and Bitcoin. Although the former has long been recognized as a safe haven asset, BTC has many distinct advantages. JPMorgan analysts said:
“From a mechanical standpoint, the bitcoin market cap is expected to increase 10 times from here to match the total private sector investment in gold through ETFs or bars and coins.”
One of the advantages of Bitcoin over gold is utility. Bitcoin is a blockchain network at its core. This means that users can send BTC to each other on a public ledger in an efficient and convenient way. To transfer gold requires physical delivery, which becomes difficult.
As seen in many cold wallet transfers, it is easier to move $ 1 billion of capital on the Bitcoin blockchain than with physical gold. The bank’s analysts further explained:
“Cryptocurrencies derive value not only because they serve as a store of wealth, but also because of their utility as a means of payment. More economic agents accept cryptocurrencies as a means of payment in the future. , the greater their utility and value. “
How long would it take for BTC to close the gap with gold?
Bitcoin is still at an infancy stage in terms of infrastructure, development, and mainstream adoption. As Cointelegraph reported, only 7% of Americans have ever bought Bitcoin, according to a study.
Some major markets, like Canada, still do not have a well-regulated foreign exchange market. Big banks have yet to take custody of crypto assets, giving Bitcoin plenty of room for growth over the next five to ten years.