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Bitcoin has ‘already surpassed’ gold by this one metric: JPMorgan Chase

Bitcoin has ‘already surpassed’ gold by this one metric: JPMorgan Chase
Markets
In volatility-adjusted terms, Bitcoin already has a larger place in investor portfolios than gold does, JPMorgan says. Credit: Shutterstock / Roman Bodnarchuk
  • Bitcoin still has 153% to go before catching up to gold in terms of value.
  • However, when adjusting for volatility, it already plays a bigger role in investor portfolios than gold does.

The resounding success of Bitcoin’s freshly launched spot exchange-traded funds is raising questions about the role the top cryptocurrency should play in investor portfolios.

“The most similar asset to compare is gold given the perception of Bitcoin as a digital version of gold,” a team of JPMorgan Chase analysts led by Nikolaos Panigirtzoglou wrote for the bank’s flows and liquidity report today.

But by one metric, Bitcoin is already surpassing gold in investor portfolios, the report said.

While Bitcoin’s total value sits at roughly $1.3 trillion, the amount of gold held for investment purposes is $3.3 trillion. So in theory, Bitcoin could still rise 153% for its value to meet gold’s.

“However, this calculation misses an important factor which is risk,” JPMorgan Chase said.

Because Bitcoin’s volatility is around 3.7 times higher than gold’s, “it would be unrealistic to expect Bitcoin to match gold within investors’ portfolios in notional amounts,” the analysts said.

Put differently, if the cryptocurrency was truly perceived as a digital analogue to gold, investors would take its volatility into account and give it a smaller role in their portfolio.

But if that were the case, Bitcoin’s total value wouldn’t push any further than $900 billion, according to the report. And its price would still be hovering at around $45,000 — instead of $67,800.

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So in volatility-adjusted terms, Bitcoin already has a larger place in investor portfolios than gold. What that suggests is investors are buying in for different reasons.

Tom Carreras is a markets correspondent at DL News. Got a tip about markets? Reach out at tcarreras@dlnews.com

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