JPMorgan trims Bitcoin price target to $130,000

JPMorgan analysts set a long-term target for the price of the first cryptocurrency at $130,000, trimming the target amid declines in gold prices, according to Business Insider.

In January, bank analysts said that Bitcoin in the long run could reach $146,000. They built the forecast on the basis of estimating the cryptocurrency’s theoretical market capitalization in the event of inflows from the gold market, for which the cryptocurrency is becoming a digital alternative.

According to JPMorgan, since mid-October outflows from the precious metal totalled $20 billion, while $7 billion flowed into Bitcoin.

The bank confirmed that digital gold is becoming an increasingly popular asset with low correlation to major markets, which investors view as a tool for portfolio diversification.

Analysts noted that the hurdle to institutional adoption of Bitcoin in 2020 was its high volatility, which has been easing in recent weeks.

The bank revised its earlier forecast due to the fall in gold prices — in January an ounce of the metal was $1,900, and in March it fell to $1,700.

“The decline in gold prices since then has mechanically reduced the expected upside for Bitcoin as a digital alternative when balancing with the weight of the precious metal in the portfolio,” JPMorgan explained.

The long-term target for Bitcoin is based on the idea that its volatility and gold’s volatility will converge. But that’s a multi-year process, the bank reminded, noting that the three-month realized volatilities stand at 86% and 16%, respectively.

Earlier, JPMorgan analysts recommended clients to invest a portion of their portfolio in Bitcoin. The bank noted an uptick in demand for digital gold from institutional investors, but stated that in the first quarter of 2021 the majority of Bitcoins were acquired by retail investors.

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