Bitcoin’s volatility normalisation encouraging – JPMorgan

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  • Bitcoin rose 100.8% in Q1 2021
  • At that time, gold fell 10.3%
  • JPMorgan said Bitcoin could go as high at $130,000

Bitcoin roared into 2021 like a lion on steroids amid a combination of institutional adoption, corporate interest, and retail piling into the market.  Think of Elon Musk and his crypto-moving tweets?

The price of bitcoin rose 100.8% in the first quarter of 2021 and a near 500% since October 2020, and in that time (Q1 2021), U.S. stocks gained 6.4% in the first quarter of 2020, while bond yields rose 3.6% and gold fell 10.3%.

Now, current market trends show that bitcoin’s volatility is cooling off as it moves closer to price movement in gold and analysts say this could actually boost its long-term valuation.

According to JPMorgan, an American investment bank and financial services holding company headquartered in New York City, “These tentative signs of Bitcoin volatility normalisation are encouraging.”

“In our opinion, a potential normalization of Bitcoin volatility from here would likely help to reinvigorate the institutional interest going forward,” JPMorgan said in a report released last week.

Bitcoin reached $61,556 on March 13, 2021. The cryptocurrency then fell about 18.12% from its high to about $50,400 before rebounding. A drop of 20% or more is considered a bear market. In mid-day trading Monday, Bitcoin fetched $59,066.41.

In early 2017, Bitcoin changed hands at less than $1,000. By December of that year, it had climbed to about $20,000. But by February 2018, the price had fallen to about $7,000. This year, Bitcoin hit an all-time high of $61,556.59.

Comparatively, gold is now valued at about $1,700 per troy ounce. It has climbed about 300% in 15 years, and it reached $2,067 last August amid economic uncertainty created by the COVID-19 lockdown.

In view of the apparent convergence, JPMorgan said Bitcoin could go as high as $130,000. Previously, the bank’s analysts said Bitcoin could rise to $146,000.

“The decline in the gold price since then has mechanically reduced the estimated upside potential for Bitcoin as a digital alternative to traditional gold, assuming an equalization with the portfolio weight of gold,” JP Morgan said.

The number of Bitcoins is limited to 21 million. As long as institutional demand remains strong, many analysts believe this will ease erratic price swings, the hallmark of an undeveloped market in an uncertain asset.

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