JPMorgan: Bitcoin ‘has already surpassed’ gold

Bitcoin has become more popular than gold in investors’ portfolios, according to a JPMorgan report published Thursday, according to one metric, helped by its price hitting new highs.

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

"However, this calculation ignores an important factor, namely risk," JPMorgan said. Because Bitcoin's volatility is about 3.7 times higher than gold, analysts said it is "unrealistic to expect Bitcoin to match gold in a nominal amount in an investor's portfolio."

In other words, if cryptocurrency is really seen as a digital analogue of gold, investors would take into account its volatility and give it a smaller weight in their portfolios. But if that were the case, Bitcoin’s total value would not exceed $900 billion, according to the report, and its price would hover around $45,000, rather than the current level of nearly $67,000.

Therefore, the report states that Bitcoin has taken a larger position in investors’ portfolios than gold from a volatility-adjusted perspective. This means that investors have different reasons for buying Bitcoin. “In other words, Bitcoin’s current price above $66,000 indicates that the implied allocation to Bitcoin in investors’ portfolios has exceeded that of volatility-adjusted gold ,” the report reads.

The price of Bitcoin briefly surpassed its all-time high of $69,000 this week before giving back some of its gains. Gold prices also hit a new record, now above $2,160 an 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 Bitcoin spot ETFs. According to JPMorgan Chase, the total amount of funds flowing into these Bitcoin ETFs has now reached $9 billion, although these funds may not all be new funds. Using gold ETFs as a reference, the size of Bitcoin ETFs may eventually reach $62 billion .

“In our view, this is a realistic target for the potential size of a Bitcoin spot ETF over time, likely achievable within two to three years, with the majority of implied net inflows likely representing a continued rotation of funds from existing vehicles and venues into a Bitcoin ETF,” the analysts said.