JP Morgan Research Report, Bullish on Bitcoin and Cryptocurrency

JP Morgan Perspectives Bullish on Bitcoin and Cryptocurrency

In a global research report published on February 18th, JP Morgan took the time to lay out how 2020 has accelerated the growth and adoption of Bitcoin and other cryptocurrencies. The report is titled “Digital transformation and the rise of fintech: Blockchain, Bitcoin and digital finance 2021,” and although it lays out a bullish case for Bitcoin, it largely focuses on the potential boom of digital finance in the next 5 years.

Bitcoin is an economic side show – the rise of digital finance is the real post-COVID-19 story.”

Although 2020 was a big year for Bitcoin, the report chooses to emphasize the increase in the necessity for digital services following a global pandemic.

COVID-19 has accelerated digitalization and technological change in the finance industry, with rising concerns that disruptive technologies could emerge as a threat to global financial stability, when combined with excess liquidity and an undefined regulatory framework.”

Cash use was already on the decline before COVID-19, and the pandemic has fueled demand for fast and convenient digital payments. The pandemic has boosted demand for digital services and also for “alternative” currencies as multiple rounds of stimulus, accommodative monetary policy, and excess savings have boosted money supply, leading to record inflows into Bitcoin investment vehicles.”

Bitcoin vs. Gold

A prominent aspect of the report is JP Morgan’s speculation on Bitcoin’s potential as a store of value relative to gold.

Bitcoin’s competition with gold as an “alternative” currency will likely continue as millennials become a more important component of investors’ universe and given their preference for “digital gold” over traditional gold.”

Although still largely in a stage of speculation, Bitcoin’s fixed supply of 21,000,000 coins makes it an incredibly sound store of value. Given that Bitcoin is still in its relative infancy compared to gold, it is no surprise that gold’s total market cap still dwarves that of Bitcoin; this discrepancy in value is where many analysts derive their predictions about Bitcoin’s potential long-term value.

In the long term, our theoretical price target of $146k is conditional on Bitcoin vol converging to that of gold, which is not only likely to be a multi-year process but would also depend on Bitcoin ownership becoming more institutional and less retail over the coming years.”

Despite all these bullish metrics, the most encouraging aspect of this report may be the fact that in came from JP Morgan. Just a mere 4 years ago they had a staunch anti-Bitcoin stance, and now they believe it is going to over $100k. This chance in stance is indicative of the undeniable financial disruption that Bitcoin is bringing to the table.