The widespread acceptance of the flagship crypto, Bitcoin, as a store for value is having a direct impact on the popular safe-haven asset, gold.
Thus, it is setting the stage for a major change in institutional asset allocation between the two, according to experts at America’s biggest bank JPMorgan Chase.
Highly revered JP Morgan Chase analyst, Nikolaos Panigirtzoglou, anticipated that gold prevailing fundamentals could turn global investors away from it and increase their inflows to Bitcoin in a matter of few years, leading to a large divergence in price between Bitcoin and Gold.
JP Morgan chase acknowledged that although Bitcoin accounts for 0.18% of assets held by the world’s elite that include their family offices, compared with 3.3% for gold ETFs, which gave further insights that only a small reallocation from gold to Bitcoin could change the status quo for the yellow metal.
What they are saying
America’s most valuable bank, JPMorgan Chase, also spoke on why it believes the odds are with Bitcoin to keep rising in value.
- “Even a modest crowding out of gold as an ‘alternative’ currency over the longer term would imply doubling or tripling of the bitcoin price,” JPMorgan Chase said.
And over time, Bitcoin could be held for other reasons such as for making payments, not just for being a store of wealth as gold is, according to JPMorgan Chase
- “Cryptocurrencies derive value not only because they serve as stores of wealth but also due to their utility as a means of payment. The more economic agents accept cryptocurrencies as a means of payment in the future, the higher their utility and value,” JPMorgan Chase explained.
What this means
In a press release to clients that was obtained by Bloomberg, the bank said:
“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”
In the short term though, “there’s a good chance that Bitcoin prices have overshot and gold is due for recovery”, the U.S elite bank added.
What you should know
Nairametrics, some weeks ago, revealed America’s biggest bank, JP Morgan Chase, released a statement on the world’s flagship crypto, where it said that Bitcoin has what it takes to challenge gold’s status as the go-to alternative financial asset.
- When compared to other financial assets like gold and crude oil, Bitcoin looks relatively small, considering that it has a market capitalization of $242 billion, compared to the precious metal’s (Gold) $2.6 trillion market value.
- However, this means the crypto has more room for upside and can potentially compete with gold as the preferred alternative currency.