In a recent note, JP Morgan strategists made a prediction suggesting that rising gold prices could cause Bitcoin (BTC) to rise and revisit its former trading price of $45,000. The prediction comes amid a mix of bull and bear price action for bitcoin over the past week.
Meanwhile, in the last 24-hours, BTC has seen a gain of 2.1% with the current trading price above $26,000. The current rally comes after bitcoin’s first drop, which took its price below its earlier market capitalization of $28,000.
Bitcoin and Gold: A Correlation
Bitcoin and gold are often considered by investors as alternative investments, and their prices exhibit a tendency to move together.
Given this, analysts at JP Morgan note that the current gold price, hovering near $2,000 an ounce, implies a bitcoin price of $45,000. This assumption is based on the idea that BTC will reach a status similar to that of gold in the portfolios of private investors.
JP Morgan wrote in a note:
With gold rising above $2,000, gold held for investment purposes outside of central banks is currently worth around [$3 trillion], In turn, this implies a price of $45,000 for bitcoin under the assumption that bitcoin is equivalent to gold in the portfolios of private investors in risk capital or [volume]- Adjusted Terms.
A major factor contributing to JPMorgan’s optimistic forecast is the upcoming bitcoin halving event, which is 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.
Strategists at JP Morgan believe that this event will drive bitcoin’s production cost to around $40,000, acting as a lower limit and potentially driving the price higher.
Drawing from historical data, JP Morgan highlights the bullish trajectory seen during previous halving events in 2016 and 2020. These events were accompanied by a significant jump in bitcoin price, indicating the possibility of a similar outcome after the next halving.
As a result, JP Morgan sets an upper limit of $45,000 for BTC, indicating limited potential beyond growth driven by the doubling of production costs.
Considering Ethereum (ETH)
While bitcoin grabs the headlines in JPMorgan’s prediction, the bank suggests that Ethereum (ETH) could face some near-term selling pressure ahead of a mid-year Shanghai upgrade. JP Morgan expects Ethereum to “somewhat underperform” BTC during this period.
However, it is essential to note that Ethereum’s performance is subject to a number of factors, including market dynamics and technological developments.
Meanwhile, BTC is currently registering a bullish trend, despite JP Morgan’s prediction. Over the past 24 hours, bitcoin has seen an increase of more than 2%, while it has seen a decline of 1.2% 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 been 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