July 29, 2021

JP Morgan explains why bitcoin will be much more volatile in the medium term


26 jun 2021 13:46 GMT

Experts estimate that the cryptocurrency is heading for the “milestone” of being six times more volatile than gold, with a value of around $ 23,000.

A possible early sale of shares in the investment fund Grayscale Bitcoin Trust (GBTC) would be a further obstacle for bitcoin, the world’s leading cryptocurrency, which would become six times more volatile than gold, JPMorgan analysts warn.

While the stock market gradually recovers positions, the cryptocurrency market is already has lost a trillion dollars of market capitalization compared to its peak of 2.5 trillion in May, recalls a group of researchers at investment bank JPMorgan.

The decisive challenge in the nearest future facing the cryptocurrency will be the unlocking of GBTC shares, at the same time that negative trends are observed in said Bitcoin fund, considered the largest in the world.

“As the 6-month immobilization period expires in June and July, these investors are likely to sell at least a portion of their GBTC shares, putting downward pressure on GBTC prices and on the bitcoin markets in general, “experts anticipate.

This, in turn, makes institutional investors more cautious when adopting cryptocurrency markets, as they are less attractive.

After analyzing the volatility of bitcoin compared to gold, the experts calculated the theoretical indicative price – about $ 140,000 – of the cryptocurrency, although they say that the forecasts are not favorable.

While Michael Novogratz, CEO of Galaxy Investment Partners, says that “bitcoin is a better version of gold,” experts estimate that cryptocurrency is heading for the “milestone” of being 6 times more volatile than traditional gold, placing its value in the medium term at one sixth of the 140,000 dollars (23,000 dollars).

“The best we can hope for in the medium term is that this volatility coefficient partially recovers, going from about 6 times today to about 4 times by the end of the year,” say analysts at JPMorgan. In this sense, they specify that if “digital gold” becomes 4 times more volatile than traditional gold, the value of bitcoin would be around $ 35,000.

Irrelevant Investor’s Michael Batnick believes that it is not a coincidence that in 2020 people were selling stocks, bonds, gold and cryptocurrencies at the same time, although you cannot speak of a strict correlation. “Sometimes bitcoin moves with the stock market, and sometimes it doesn’t”, he maintains.

The cryptocurrency reached the downward trend known as ‘the cross of death’ on Monday, causing the collapse of other cryptocurrencies. Currently the price of bitcoin is below $ 34,000.