The report from JPMorgan released on Thursday indicates that Bitcoin has become more popular than gold in investors' portfolios, thanks to its continuously soaring price.
As a mainstream cryptocurrency, Bitcoin has long been compared to gold, with some considering it as a digital version of the precious metal. Initially, gold's proportion in investment portfolios was expected to be higher than Bitcoin's, given that an estimated $3.3 trillion is allocated to gold investments. However, JPMorgan suggests that when comparing the nominal amounts of these two assets, Bitcoin's allocation seems lower as its market capitalization is only $1.3 trillion. Therefore, theoretically, Bitcoin's value could still rise by 153% to reach the level of gold.
"However, this calculation overlooks an important factor, which is risk," JPMorgan stated. Due to Bitcoin's volatility being approximately 3.7 times higher than that of gold, analysts argue that expecting Bitcoin to match gold in nominal amounts in investors' portfolios is unrealistic.
In other words, if cryptocurrencies are indeed viewed as a digital analogy to gold, investors would consider its volatility and allocate a smaller proportion to it in their portfolios. However, according to the report, if this were the case, Bitcoin's total value would not exceed $900 billion, and its price would hover around $45,000 instead of the current nearly $67,000.
Therefore, the report concludes that from a volatility-adjusted perspective, Bitcoin has already occupied a larger position in investors' portfolios than gold. This suggests that investors have varied reasons for purchasing Bitcoin. The report states, "In other words, Bitcoin's current price above $66,000 implies that the implied allocation to Bitcoin in investors' portfolios has exceeded that of gold adjusted for volatility."
Bitcoin's price briefly surpassed its all-time high of $69,000 earlier this week before retracing some gains. The price of gold has also hit a new record, currently exceeding $2,160 per ounce. Although both assets benefit from speculation about the Fed's potential interest rate cuts this year, Bitcoin has gained additional momentum due to the upcoming halving event and the recent introduction of Bitcoin spot ETFs. According to JPMorgan's data, the total inflow into these Bitcoin ETFs has reached $9 billion, although not all of these funds may be entirely new. Using gold ETFs as a reference, the size of Bitcoin ETFs could eventually reach $62 billion.
Analysts suggest,"this represents a realistic target for the potential size of Bitcoin spot ETFs over time, possibly achieved within two to three years, with much of the implied net inflows representing a continuous rotation of funds from existing vehicles and venues to Bitcoin ETFs."
