On a recent note, JPMorgan strategists have done a job prediction, indicating that Bitcoin (BTC) could rise and revisit its previous trading price of $45,000 due to the surge in the gold price. This prediction comes amid a mix of bulls and bears in the Bitcoin price action in the past week.
Meanwhile, over the past 24 hours, BTC has seen a gain of 2.1% with the current price trading above $26,000. The current rally comes after Bitcoin’s previous decline which took its price below the market price previously hovering at $28,000.
Bitcoin and Gold: Correlation
Bitcoin and gold are often viewed by investors as alternative investments, and their prices have shown a tendency to move in tandem.
Given this, JPMorgan analysts point out that the current gold price, which is hovering near $2,000 an ounce, means Bitcoin is at $45,000. This assumption is based on the idea that BTC will reach a similar status to gold in the portfolios of private investors.
JPMorgan wrote in a note:
With the price of gold above $2,000, the value of gold held for investment purposes outside central banks is currently estimated at around $3 trillion. In turn, this means a price of $45,000 for bitcoin assuming bitcoin is worth gold in the portfolios of private investors in venture capital or adjusted terms (volume).
A major contributor to JPMorgan’s optimistic forecast is the upcoming Bitcoin Halving event, scheduled to take place between April and May 2024. The halving mechanism reduces the rate at which new bitcoins are produced, effectively doubling the production cost.
JPMorgan strategists believe that this event will raise the production cost of Bitcoin to close to $40,000, which is a lower bound and is likely to drive the price higher.
Drawing on historical data, JPMorgan highlights the bullish trajectory observed during the previous halving events in 2016 and 2020. These events were accompanied by significant bitcoin price hikes, indicating the potential for a similar outcome after the next halving.
As a result, JPMorgan set a cap of $45,000 for BTC, indicating limited potential beyond an increase driven by a doubling of production costs.
Thinking about Ethereum (ETH)
While Bitcoin highlights JPMorgan’s predictions, the bank notes that Ethereum (ETH) may face some selling pressure in the near term, extending beyond the Shanghai upgrade into the middle of the year. JPMorgan expects Ethereum to perform “somewhat weakly” for BTC during this period.
However, it is important to note that the performance of Ethereum is subject to a range of factors, including market dynamics and technological developments.
Meanwhile, regardless of JPMorgan’s predictions, BTC is currently in an uptrend, recording a slight increase. Over the past 24 hours, Bitcoin has seen gains of more than 2%, while the past seven days have seen it drop by 1.2%.
At the time of writing, the highest cryptocurrency is currently trading at $26,823. However, Bitcoin trading volume has hovered around $20 billion in the past seven days, which indicates a potential buildup. Bitcoin trading volume is currently $13.1 billion in the last 24 hours.
Featured image from Shutterstock, chart from TradingView
