In a recent note, JPMorgan strategists have made a prediction, suggesting that Bitcoin (BTC) could soar and revisit its former trading price of $45,000 due to the rising price of gold. This prediction comes amid Bitcoin’s price action of a blend of bulls and bears in the past week.
Meanwhile, over the past 24 hours, BTC has seen a 2.1% gain with a current trading price above $26,000. The current surge comes after Bitcoin previously fall that dropped its price below its previously ranging market price of $28,000.
Bitcoin And Gold: A Correlation
Bitcoin and gold have often been regarded as alternative investments by investors, and their prices have displayed a tendency to move in tandem.
Given this, JPMorgan analysts note that the current gold price, hovering near $2,000 per ounce, implies a Bitcoin price of $45,000. This assumption is based on the idea that BTC will reach a similar standing as gold in the portfolios of private investors.
JP Morgan wrote in a note:
With the gold price rising above $2,000, the value of gold held for investment purposes outside central banks is currently valued at around [$3 trillion]. In turn, this implies a $45,000 price for bitcoin under the assumption that bitcoin equalizes gold in private investors’ portfolios in risk capital or [volume]-adjusted terms.
One key factor contributing to JPMorgan’s optimistic prediction is the upcoming Bitcoin halving event, scheduled to take place between April and May 2024. The halving mechanism reduces the rate at which new Bitcoins are produced, effectively doubling the production cost.
The JPMorgan strategists believe this event will push Bitcoin’s production cost to approximately $40,000, acting as a lower bound and potentially driving the price upward.
Drawing from historical data, JPMorgan highlights the bullish trajectory observed during previous halving events in 2016 and 2020. These events were accompanied by significant surges in Bitcoin prices, indicating the potential for a similar outcome following the next halving.
As a result, JPMorgan sets an upper limit of $45,000 for BTC, indicating limited potential beyond the increase driven by the doubling of production costs.
Reflecting On Ethereum (ETH)
While Bitcoin takes the spotlight in JPMorgan’s prediction, the bank suggests that Ethereum (ETH) may face some selling pressure in the near term, extending beyond the Shanghai upgrade until mid-year. JPMorgan expects Ethereum to “somewhat underperform” BTC during this period.
However, it’s essential to note that Ethereum’s performance is subject to a range of factors, including market dynamics and technological developments.
Meanwhile, regardless of JPMorgan’s prediction, BTC is currently in a bullish trend recording an uptick. Over the past 24 hours, Bitcoin has seen more than a 2% gain, while the past seven days have seen a dip of 1.2%.
At the time of writing, the top crypto currently trades at $26,823. Bitcoin’s trading volume has, however, ranged around $20 billion in the past 7 days, indicating a possible accumulation. Bitcoin currently has a trading volume of $13.1 billion in the past 24 hours.
Featured image from Shutterstock, Chart from TradingView