JP Morgan: Bitcoin “has surpassed” gold

Bitcoin has become more popular than gold in investors’ portfolios, one indicator shows, as its price continues to rise, according to a report released by JPMorgan on Thursday. Hit a new high.

As a mainstream cryptocurrency, Bitcoin has long been compared to gold, with some considering it a digital version of gold. On the face of it, gold should account for a higher proportion of investment portfolios than Bitcoin, as an estimated $3.3 trillion is invested in gold. JPMorgan said that when comparing the two assets in nominal terms, the allocation to Bitcoin appears to be lower because Bitcoin has a market capitalization of only $1.3 trillion. Therefore, in theory, the value of Bitcoin can still rise by 153% to reach the value level of gold.

“However, this calculation ignores an important factor, namely risk,” JPMorgan said. Since Bitcoin is about 3.7 times more volatile than gold, analysts said, "It is unrealistic to expect Bitcoin to match gold in nominal amounts in investors' portfolios."

In other words, if cryptocurrency were truly viewed as a digital analog to gold, investors would take its volatility into account and give it a smaller weighting in their portfolios. But if that were the case, according to the report, Bitcoin’s total value would not exceed $900 billion, and its price should hover around $45,000 instead of closer to $67,000 now.

As a result, the report states that from a volatility-adjusted perspective,Bitcoin already occupies a larger position in investors’ portfolios than gold. This means investors have different reasons for buying Bitcoin. The report reads: “In other words, Bitcoin’s current price above $66,000 suggests that theimplied allocation to Bitcoin in investors’ portfolios has exceeded the volatility Gold after adjustment."

Bitcoin's price briefly surpassed its all-time high of $69,000 this week before giving back some of its gains. The price of gold has also set a new record, currently exceeding $2,160 per ounce. While both assets have benefited from speculation that the Federal Reserve may cut interest rates this year, Bitcoin has also received an additional boost from the upcoming halving event and the recent emergence of a Bitcoin spot ETF. Total inflows into these Bitcoin ETFs have now reached $9 billion, according to JPMorgan Chase, although not all of them may be new money. Taking the gold ETF as a reference, the size of the Bitcoin ETF may eventually reach US$62 billion.

The analysts said: “In our view, this is a realistic target for the potential size of the Bitcoin spot ETF over time, which may be achieved in two to three years, and most of the implicit Net inflows may represent a continued rotation of funds into Bitcoin ETFs from existing instruments and venues."