Strategists at JPMorgan Chase have recently revealed that Bitcoin has been exhibiting less volatility compared to gold, despite its tumultuous journey in the market. The world’s largest cryptocurrency by market capitalization has experienced a dramatic decline of nearly 22% this year, even following a notable rally on February 6. This has led investors to question Bitcoin’s status as “digital gold,” particularly given its limited supply of 21 million tokens and its potential role as a hedge against currency debasement and inflation.
For those familiar with the cryptocurrency landscape, substantial sell-offs and considerable bear markets are not uncommon and tend to emerge every few years. Despite the current downturn and rising concerns among investors, JPMorgan’s analysts view Bitcoin as an appealing long-term investment, arguing that it could become even more attractive than gold in the future.
Bitcoin’s value has fluctuated relatively less than gold in recent times. While gold prices surged due to worries about a weakening dollar and ongoing U.S. government debt issues, as well as geopolitical tensions and concerns regarding the Federal Reserve’s autonomy, Bitcoin appeared to initially align with gold’s upward trajectory last year. However, so far this year, the two assets have diverged, with gold facing its own struggles recently.
In a research note, the JPMorgan team led by Nikolaos Panigirtzoglou indicated that cryptocurrencies have come under increased pressure as risk assets, particularly technology stocks, suffered substantial corrections. This has correlated with sharp declines in the values of gold and silver as well, which are traditionally viewed as safe havens in volatile markets.
Interestingly, Panigirtzoglou noted that while gold has outperformed Bitcoin since October, it has done so with much higher volatility. This observation positions Bitcoin as “even more attractive compared to gold.” He posited that if Bitcoin’s volatility were to align with that of gold, its price could potentially skyrocket to $266,000 per token, representing a significant upside from current levels, which hover below $69,000.
Although Panigirtzoglou does not foresee this scenario taking shape in the immediate future, it highlights Bitcoin’s potential as a safe haven asset for the long term. The ongoing debate surrounding its classification as digital gold centers on the fact that Bitcoin tends to behave more like a high-beta tech stock. As the tech sector has faced considerable pressures, this has inadvertently affected Bitcoin and the broader cryptocurrency market as well.
Despite the current challenges, some industry insiders believe it is crucial for investors to remember Bitcoin’s resilience, having endured multiple drawdowns exceeding 90% only to reach new heights each time. While the final judgement on Bitcoin’s digital gold status is still pending, it remains a potential unique diversifier in a multi-asset portfolio, suggesting that allocating at least a small portion of capital to it may be worthwhile for investors.
