As per the Business Insider report, the declining bitcoin’s price volatility in recent weeks has made the leading cryptocurrency more appealing to institutions that are seeking low-correlation assets to better diversify investment portfolios, JPMorgan said in a note on Thursday. A boost in institutional adoption of bitcoin is “likely to arise from the recent change in the correlation structure of bitcoin relative to traditional asset classes,” the US bank explained.
“High volatility acts as a headwind towards further institutional adoption.”
One of the major barriers to institutions in adopting the leading cryptocurrency has been its markedly high volatility, which exploded in 2020 as bitcoin more than tripled. From a risk management point of view, high volatility “acts as a headwind towards further institutional adoption,” JPMorgan said. There are signs that bitcoin’s volatility is normalizing, which would help “reinvigorate” interest by professional investors to include the leading cryptocurrency in its asset allocations. Bitcoin has witnessed massive growth this year, reaching its all-time highs several times.
JPMorgan expects bitcoin’s price to reach $130,000 in the long term.
One asset that’s negatively impacted by bitcoin’s growing favor with institutions is gold. According to the bank, the precious metal has seen $20 billion in fund outflows since mid-October, compared to $7 billion in bitcoin fund inflows over that same time period. “Considering how big the financial investment into gold is, any such crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin over the long term,” JPMorgan said. That upside includes a long-term price target of $130,000, representing a potential upside of 121% from current levels. “Mechanically, the bitcoin price would have to rise to $130,000, to match the total private sector investment in gold,” JPMorgan said, based on the current price of gold of $1,700.