JPMorgan Chase: Bitcoin will retreat to $26,000 in the short term, and investors should not view it as a substitute for gold

Nikolaos Panigirtzoglou, a strategist and digital asset expert at JP Morgan, released a report saying that the current fair value of Bitcoin is between $24,000 and $36,000. Before starting a new rise, Bitcoin will retreat to $26,000 in the short term.

The report said that the boom and bust dynamics of the past few weeks represent a setback for institutional adoption of the cryptocurrency market, especially Bitcoin and Ethereum. Rising volatility, especially relative to gold, is a barrier to further institutional adoption as it reduces the attractiveness of digital gold in institutional portfolios compared to traditional gold.

The report wrote that as Bitcoin prices continued to sluggish, institutional investors' enthusiasm for buying on dips showed signs of weakening, and data from the Chicago Mercantile Exchange showed little interest in buying at low prices.

Bitcoin funds continue to see outflows, while gold exchange-traded funds continue to see inflows, suggesting that institutional investors are shifting from Bitcoin to traditional gold.

In a recent CNBC interview, Jeff Currie, global head of commodities research at Goldman Sachs, warned that cryptocurrencies have risks and people should not view them as a gold alternative.

"Digital currencies are not a substitute for gold. If anything, they are a substitute for copper. Bitcoin is a high-risk asset," he said.

Currie explained that Bitcoin is very volatile and should not be called "digital gold" because it is a very new asset. Gold is a safe-haven asset that can hedge against severe inflation.

Over the years, Goldman Sachs has shown very controversial views on cryptocurrencies. In 2017, the institution launched a cryptocurrency trading desk, decided to stop trading, and eventually restarted it. In 2020, the global investment bank said that digital assets are a bad investment. In addition, some analysts at the company believe that Bitcoin and cryptocurrencies are not an asset class.

However, a report last week, which described the basic characteristics of major cryptocurrencies and the purpose of each, suggests that may have changed.

The agency gave its opinion on some of the most popular digital assets, including Bitcoin as a large-cap currency, XRP as a real-time settlement system, Ethereum as a smart contract platform, BNB as a utility token/application, and Polkadot as a blockchain with interoperability capabilities.

In addition, Goldman Sachs said that the value of Bitcoin lies fundamentally in its use and acceptance.