JPMorgan: Bitcoin Unlikely to Reach Gold’s Portfolio Allocation in Nominal Terms
JPMorgan indicated in a research report that for Bitcoin to match gold’s allocation in investor portfolios, its market cap would need to reach $3.3 trillion. This would require the price of Bitcoin to more than double, but the likelihood of this happening is low due to the cryptocurrency’s inherent risk and high volatility. The report highlighted gold as the most suitable comparison for Bitcoin, given investors’ perception of Bitcoin as a digital equivalent to the precious metal.
Analysts led by Nikolaos Panigirtzoglou explained that investors typically consider risk and volatility when allocating across asset classes. Given that Bitcoin’s volatility is approximately 3.7 times higher than that of gold, expecting Bitcoin to match gold within investors’ portfolios in terms of notional amounts would be unrealistic.
JPMorgan further stated that if Bitcoin were to match gold in “risk capital terms,” the implied allocation would drop to $0.9 trillion, resulting in a price estimate of $45,000. This is notably lower than Bitcoin’s current price of around $67,400.
The authors noted that at the current price of $66,000, Bitcoin’s implied allocation within investors’ portfolios has already exceeded that of gold in volatility-adjusted terms.
Regarding the potential size of the Bitcoin ETF market, the bank estimated it to be around $62 billion based on the volatility ratio of 3.7. Net inflow into spot Bitcoin ETFs is approximately $9 billion, some of which may have come from existing products through a rotational shift.
The report concluded by suggesting that $62 billion could be a realistic target for the size of spot Bitcoin ETFs over the next two to three years. However, it acknowledged that much of the implied net inflow could represent a continued shift from existing instruments and venues to ETFs.
