The investment bank makes a bullish comment for bitcoin as an "alternative currency" that not only serves as a storehouse of wealth but also as a means of payment.
The tide is changing.
This week PayPal announced support for cryptocurrencies, and now JP Morgan is changing the tune, as it says, Bitcoin is competing with gold as an "alternative" currency.
The physical gold market, favored by older generations, is worth $ 2.6 billion, including assets held within gold ETFs.
Bitcoin, on the other hand, has a market cap of $ 240 billion and is mostly favored by millennial investors. In 2020, to date, Bitcoin has increased by more than 80% compared to almost 25% of gold.
To recover in terms of market value, the leading digital currency would have to rise more than 10x above current levels. JPMorgan said in a note on Friday,
"Even a modest agglomeration of gold as an 'alternative' currency in the long run would mean doubling or tripling the price of bitcoin"
Over time, the investment bank said that crypto could be owned for reasons other than just being a wealth store like gold is.
"Cryptocurrencies derive from value not only because they serve as stores of wealth, but also because of their usefulness as a means of payment. The more economic agents accept cryptocurrencies as a means of payment in the future, the greater their usefulness and value"
PayPal also mentioned that the payment company's endorsement is "another big step towards corporate support for bitcoin". This, they said, would further reinforce the use of BTC millennials as an alternative currency.
Greater interest in institutional investors
Overall, the long-term potential for bitcoin is considerable, as it competes more "intensely" with gold, "given that millennials would over time become a more important component of the investor universe," says JPMorgan.
Millennials and corporate support for digital currency have also sparked greater interest from institutional investors, the report says.
This is evidenced by the peak of activity in both bitcoin futures and options in CME. Prior to Paypal's announcement this week, open interest on CME's BITCOIN futures measured a record of 10.5K contracts per day in the third quarter, an increase of 32% in terms of the second quarter and an increase of 127% compared to 3rd quarter of 2019.
In addition, the institutional flow registered strong growth, with 692 new accounts added, and the number of large holders of OI also registered an average of 79 in the 3rd quarter, an increase of 64% in relation to the 3rd quarter of 2019.
"Holy Cow. Most of the bullish bitcoin comments I read from JP Morgan," noted Dan Tapiero, co-founder of 10T Holdings. "A piece of widespread investigation reaches all customers of the bank. Paypal has announced" coverage "for other traditional players to get involved," he added.