A team of JPMorgan analysts, led by Nikolaos Panigirtzoglou, provided insights into the realistic expectations for Bitcoin’s market capitalization and its potential to match the amounts of gold within investors’ portfolios.
The report highlighted that risk and volatility are critical factors often overlooked in the argument, suggesting bitcoin should match gold in investors’ portfolios. The analysts pointed out that bitcoin’s volatility is approximately 3.7 times higher than that of gold, making it unrealistic to expect bitcoin to match gold in notional amounts within investors’ portfolios.
JPMorgan said that if Bitcoin were to match gold in “risk capital terms,” the implied allocation would drop to $0.9 trillion, implying a price of $45,000, notably lower than its current level of around $67,400.
Regarding the potential size of spot bitcoin ETFs, the analysts suggested a realistic target of approximately $62 billion over time, possibly within two to three years. This figure is based on applying the same volatility ratio of 3.7 to the $230 billion of gold held in fund format.
While spot bitcoin ETFs outside of Grayscale Bitcoin Trust have already witnessed a cumulative inflow of $19 billion since their launch, the analysts expressed skepticism that the entire $9 billion net inflow represents new money entering the crypto space. Instead, they believe retail investors are likely shifting from existing instruments and venues to new spot bitcoin ETFs.
The report provides a balanced perspective on Bitcoin’s potential to match gold in investor portfolios, considering risk and volatility factors. It offers a realistic target for the potential size of spot bitcoin ETFs and acknowledges the possibility of rotational shifts from existing instruments to ETFs.
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