The majority of May we saw a decline in the price of Bitcoin, but if the current level of gold stocks is any indication, the token should be trading higher, according to a study released on Wednesday by J.P. Morgan analysts.
Some investors equate Bitcoin and gold as being interchangeable. Although the token has performed poorly in each of these roles, they are both theoretically utilized as means of value storage and as protection against inflation. Institutional investors have mostly stuck with gold, despite some common investors lately buying cryptocurrencies.
Even taking that preference into account, the current price of gold and gold stocks, at just under $2,000 per ounce, predicts a price for Bitcoin of $45,000, which is much higher than its present level of roughly $26,200, assuming investors regard them as interchangeable. Of all, Bitcoin has only been used as a store of wealth for 14 years, whereas gold has been used for thousands of years, making that assumption very tenuous.
Another possible source of support for Bitcoin’s price is the so-called halving event, which the cryptocurrency is expected to undergo next April or May. Bitcoin miners get tokens for processing transactions and safeguarding the Bitcoin network, but their earnings are cut in half every four years.
If everything else remains constant, the halving will quadruple the cost of mining one Bitcoin to almost $40,000. The researchers said that in the past, the manufacturing cost served as a lower constraint for token values.
None of this implies that the bank’s strategists are enthusiastic about digital assets. In the short term, Bitcoin and other tokens are experiencing significant regulatory pushback, making it more difficult for institutions to retain the tokens and the cryptocurrency business to expand. The demise of crypto trading platform FTX brought to a close a 12-month period in which Bitcoin values plummeted by more than half, and most investors who dabbled with tokens in a previous couple of years are sitting on losses.
The analysts stated that the regulatory crackdown in the United States, the disruption of banking networks for the crypto ecosystem, and the fallout from last year’s FTX crash are likely to limit any possible upside.