The stabilization in the price of bitcoin, a reduction in its volatility, could help institutions to invest in this cryptocurrency with greater confidence, according to the bank JPMorgan Chase & Co.
As reported by Bloomberg, JPMorgan, one of the most iconic financial institutions in the United States, argued that institutional interest in cryptocurrency could benefit from a decline in BTC volatility.
In an email sent to its investors on Thursday, April 1, the bank’s financial strategists argued that “the signs that bitcoin volatility is normalizing are encouraging. In our opinion, a potential normalization of bitcoin volatility can help rekindle institutional interest in cryptocurrency, ”they said.
In the email, financial strategists would have assured that during the last three months, the average volatility of BTC fell to 86%, when in February it exceeded 90%. Meanwhile, the average for the last 6 months stabilized at 73%, according to JPMorgan analysts.
The strategists also assured that the volatility of the cryptocurrency has kept institutions away from it, due to the financial risks of suffering a potential price drop.
Likewise, they also affirmed that during the last 8 months, the growth of bitcoin has been correlated with the decrease of gold. The relationship they establish is the income of USD 7 billion in investment funds based on BTC, while USD 20 billion have been withdrawn from the exchanges where the gold stock indices are exchanged.
Strategists believe that the price of bitcoin would have to rise to $ 130,000 for its market to equal “private sector investment in gold.”
This amount represents a 121% increase over the current price of BTC, so it would be considered as a long-term goal. The publication points out that for this to happen, BTC has to lower its volatility until it reaches that of gold, which is around 16% according to estimates.
However, they indicate that in recent months the volatility of the bitcoin market with respect to traditional assets has adjusted more evenly. This represents an attractive point for those who want to diversify their investment portfolios and protect themselves from the depreciation of these assets against the US dollar, they point out.
More volatility, more vitality
Although every investor should evaluate his financial strategy according to his needs, the bullish thesis on BTC seems to be comfortable with the idea of volatility.
In an interview issued in January this year, Michael Saylor, CEO of MicroStrategy, and one of the most influential voices regarding long-term institutional investment in BTC, stated that he prefers a volatile and ‘live’ asset, rather than a stable and ‘ dead”.
He believes that bitcoin price corrections will be less and less. The bitcoin market will stabilize as institutions enter the market. Second, I believe that everything that is alive on this earth is volatile, and that which is dead is not volatile. I’d much rather have a 300% return on a volatile asset than a 15% return on a non-volatile asset. Stability is stagnation, while volatility is vitality. Living things are volatile.
Michael Saylro, CEO of MicroStrategy.
On the other hand, he pointed out that the differences between gold and bitcoin will make more and more investors sell their positions and buy BTC. “People saw in 2020 that gold did not function as a safe haven against inflation and bitcoin did,” he said, attributing this financial phenomenon to the technological superiority of Bitcoin over gold and other assets.
According to other analyzes, such as one from the Ecoinometrics firm, the volatility of BTC is natural in this asset since it is just in its growth stage, of price discovery in the market. Although price declines are usually more pronounced than increases, bitcoin would not have greater volatility than companies such as Square, Amazon and Apple when compared with other variables in a wider window of time.