According to JPMorgan Chase & Co., Bitcoin has the potential to reach $146,000 in the long term as it competes with gold as an asset class.
Bitcoin's market capitalization of around $575 billion would have to rise by 4.6 times (for a theoretical price of $146,000) to match the total private sector investment in gold via exchange-traded funds (ETFs) or bars and coins, said strategists led by Nikolaos Panigirtzoglou in a note quoted in a Bloomberg report.
However, this outlook depends on the volatility of Bitcoin converging with that of gold to encourage more institutional investment, a process that will take some time, they said.
"A crowding out of gold as an 'alternative' currency implies big upside for Bitcoin over the long term," the strategists wrote, but, "a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year."
On Tuesday, Bitcoin skyrocketed to a new peak of $48,216 as Tesla's interest in the cryptocurrency fuelled demand. Prices have declined to $46,000 levels on Wednesday on profit-booking.
For now, JPMorgan sees headwinds for the largest cryptocurrency, with indicators like a buildup of speculative long positions and an increase in investment wallets holding small amounts of Bitcoin showing potential froth.
"The valuation and position backdrop has become a lot more challenging for Bitcoin at the beginning of the New Year," the strategists wrote. "While we cannot exclude the possibility that the current speculative mania will propagate further pushing the Bitcoin price up toward the consensus region of between $50,000-$100,000, we believe that such price levels would prove unsustainable."