Bitcoin breaks through $35,000 to hit a new record high and reappears its ups and downs

On January 6, according to the Bitstamp platform, Bitcoin rose above $35,000 per coin, setting a new record high. According to Bitcoin Home, due to reverse operations, a total of 46,178 people were liquidated in the past 24 hours, and more than 2.8 billion yuan of funds were wiped out.

JPMorgan Chase: Bitcoin price is expected to rise to $146,000 in the long run

According to foreign media reports, as the price of Bitcoin has returned to over $30,000, major banks have begun to pay attention to Bitcoin, and some banks have even made bold price predictions. JPMorgan Chase said that in the long run, the price of Bitcoin is expected to rise to $146,000.

The latest forecast also points to huge upside for Bitcoin in the long term, given its role as an “alternative currency” to gold. JPMorgan and others say the outlook for Bitcoin remains very positive in the long term.

Bitcoin is the world's largest cryptocurrency, known for its wild price fluctuations. Data from the coingecko website shows that as of press time, the price of Bitcoin is $34,813. In the past 24 hours, the price of the cryptocurrency has reached a high of $30,321 and a low of $34,684.

Bitcoin is a cryptocurrency that uses blockchain as a payment system. It was invented and created by Satoshi Nakamoto in 2009 based on a borderless peer-to-peer network and consensus-driven open source software. Through encrypted digital signatures, it can solve problems such as multiple payments with one coin and transaction security without going through any third-party credit institutions.

The supply of Bitcoin is reportedly limited to 21 million, a number that is expected to be reached around 2140. The cryptocurrency must be stored in a digital wallet, either online through an exchange like Coinbase or offline on a hard drive using specialized software.

“Bull” on Bitcoin

After breaking above $34,000 for the first time, bitcoin fell as much as 17% on Monday, its biggest drop since March. Still, the world’s largest cryptocurrency has quadrupled in value over the past year.

JPMorgan Chase has become a staunch Bitcoin bull after admitting it was wrong to predict the end of the Bitcoin bull run two months ago.

"The squeeze out of gold for an 'alternative' currency means a lot of upside for Bitcoin in the long run," said Nikolaos Panigirtzoglou, a strategist at JPMorgan Chase & Co.

If the Bitcoin market wants to match the current private investment volume in the gold market, the current market value of US$575 billion is far from enough. It needs to be significantly expanded by 4.6 times, that is, the unit price must reach US$146,000.

Why is it 4.6 times? JPMorgan Chase said that most of the current private gold wealth is gold bars and gold coins, including gold ETFs. The inventory of these gold bars and gold coins (excluding gold bars and gold coins held by central banks) totals 42,600 tons, totaling US$2.7 trillion.

As for the valuation of Bitcoin, strategists said that two indicators have been used before, one based on comparison with gold and the other based on mining costs or intrinsic value.

Strategists said that Grayscale Bitcoin Trust's allocation to Bitcoin accounts for 87% of its total portfolio, while its allocation to gold is only 17%. In other words, their investment in Bitcoin is 5.1 times that of gold. The ratio of general funds is roughly between 3.4 and 5.1 times, which means that the average risk capital allocation of the world's largest Bitcoin fund to Bitcoin is close to 4.6 times that of gold.

In other words, from the perspective of venture capital, Bitcoin is comparable to gold in attracting private investment outside the central bank. Therefore, JPMorgan Chase believes that the current market target price range of $50,000 to $100,000 is actually risky.

Since mid-October, gold ETFs have seen outflows of more than $7 billion. In the view of strategists, Bitcoin can "put pressure" on gold because of the millennials' interest in Bitcoin. Over time, young investors will inevitably become the main force of the investor group.

In terms of mining costs or intrinsic value, the ratio of Bitcoin market price to its intrinsic value has once again reached the peak at the end of 2017, which does not mean that mining costs are driving market value, or quite the opposite. However, this does not mean that Bitcoin price will continue to deviate from its mining costs. Similar to gold, when the Bitcoin market price is much higher than the production cost, mining activity and mining difficulty will increase, pushing the production cost to the market price, resulting in a certain convergence.

Short-term risks cannot be ignored

Because of volatility, Bitcoin’s long-term goal will take some time. In fact, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, more institutions and famous investors have begun to allocate funds to Bitcoin, or are willing to allocate.

Some investors believe that cryptocurrencies can hedge against a weak dollar, while others believe that they can also deal with inflation risks and bubbles in an environment full of fiscal and monetary policy stimulus.

However, the short-term risks of Bitcoin cannot be ignored. The increase in speculative long positions and retail investors holding small amounts of Bitcoin are considered by JPMorgan to be the biggest unfavorable factors currently facing Bitcoin, as the increase in these indicators may indicate a potential bubble in Bitcoin.

The following chart shows the surge in Bitcoin’s daily trading volume:

The following chart shows the growing number of Bitcoin accounts:

“While we cannot rule out the possibility that the current speculative craze could spread further, pushing the price of Bitcoin towards $50,000-100,000, we believe such price levels are unsustainable.”

Sina Finance compiled from TechWeb, Wall Street News, etc.