Strategists at JPMorgan, led by Nikolaos Panigirtzoglou, have reportedly suggested that the rising price of gold could imply a Bitcoin price of $45,000. The two assets, often seen as alternatives by investors, tend to move in tandem.
According to a report by The Block, the current gold price, nearing $2,000 per ounce, would suggest a Bitcoin price of $45,000, given the value of gold held for investment purposes outside central banks is currently around $3 trillion. The strategists propose that this could lead to Bitcoin equalizing gold in private investors’ portfolios in risk capital or volume-adjusted terms.
However, JPMorgan considers the $45,000 Bitcoin price as an upper limit, indicating the limited potential for the asset beyond the increase driven by the doubling of mining or production costs. The upcoming Bitcoin halving event, expected in April or May 2024, would mechanically double Bitcoin’s production cost to around $40,000. Historically, Bitcoin’s production cost has acted as an effective lower bound, with previous halving events in 2016 and 2020 accompanied by a bullish trajectory for Bitcoin prices, as noted by The Block.
The Bitcoin halving event occurs approximately every four years and reduces the reward for mining new Bitcoin blocks by half, effectively decreasing the rate at which new bitcoins are created to control inflation and maintain scarcity.
JPMorgan assumes a 25% return on Bitcoin over the next 12 months, a timeframe that captures the expected 2024 halving event. However, the bank expects Ethereum (ETH) to somewhat underperform Bitcoin in the near term, beyond the Shanghai upgrade until mid-year, as reported by The Block.
Despite these predictions, JPMorgan maintains a cautious stance on digital assets, citing potential headwinds from the U.S. regulatory crackdown, disruptions to crypto banking networks, and the ongoing repercussions from the FTX exchange collapse. As of the time of writing, Bitcoin is trading at around $26,823 (up 1.79% in the past 24-hour period) and Ethereum is trading at about $1,832 (up 1.85% in the past 24 hours).