In a recent note, JPMorgan strategists have a prediction, suggesting that Bitcoin (BTC) could rise and revise its former trading price of $45,000 due to the rising price of gold. This prediction comes amid Bitcoin’s price action from a mix of bulls and bears over the past week.
Meanwhile, BTC has seen a 2.1% gain over the past 24 hours with a current trading price above $26,000. The current increase comes after Bitcoin’s earlier decline, which dropped its price below the previously fluctuating market price of $28,000.
Bitcoin and Gold: A Correlation
Bitcoin and gold are often viewed by investors as alternative investments and their prices tend to move together.
Therefore, JPMorgan analysts note that the current price of gold, hovering around $2,000 an ounce, implies a Bitcoin price of $45,000. This assumption is based on the idea that BTC will reach a position similar to gold in the portfolios of private investors.
JP Morgan wrote in a note:
With the gold price rising above $2,000, the value of gold held outside central banks for investment purposes is currently valued at about [$3 trillion]. This, in turn, implies a price of $45,000 for bitcoin assuming that bitcoin outperforms the gold in the portfolios of private venture capital investors or [volume]- adjusted conditions.
A major contributing factor 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 cost of production.
JPMorgan strategists believe this event will push Bitcoin’s cost of production to around $40,000, which will act as a lower bound and potentially push the price upwards.
Based on historical data, JPMorgan highlights the bullish trajectory observed during previous halving events in 2016 and 2020. These events were accompanied by significant increases in Bitcoin prices, indicating the potential for a similar outcome after the next halving.
As a result, JPMorgan sets a $45,000 cap for BTC, indicating limited potential beyond the increase caused by the doubling of production costs.
Thinking about Ethereum (ETH)
While Bitcoin is in the spotlight in JPMorgan’s forecast, the bank suggests that Ethereum (ETH) may experience some short-term selling pressure, extending beyond the Shanghai upgrade to mid-year. JPMorgan expects Ethereum to “underperform” BTC during this period.
However, it is essential to note that Ethereum’s performance is subject to a range of factors, including market dynamics and technological developments.
Meanwhile, regardless of JPMorgan’s forecast, BTC is currently in a bullish trend registering an uptick. Bitcoin has gained more than 2% in the past 24 hours, while it has seen a 1.2% decline over the past seven days.
At the time of writing, the top crypto is currently trading at $26,823. However, Bitcoin’s trading volume has hovered around $20 billion over the past 7 days, indicating a possible accumulation. Bitcoin currently has a trading volume of $13.1 billion in the last 24 hours.
Featured image from Shutterstock, chart from TradingView