There has been a lot of talk about Bitcoin (BTC) surpassing gold’s allocation in investors' portfolios as the top crypto trades near all-time highs following the launch of multiple spot BTC exchange-traded funds (ETF) in the United States, but according to analyst at JPMorgan (JPM), it won’t happen anytime soon.
For BTC’s allocation to surpass that of gold, its market cap would need to rise to $3.3 trillion, JPM analysts led by Nikolaos Panigirtzoglou said in a new report. They noted that the topic has gained traction as more investors have come to perceive Bitcoin as a digital version of gold.
“Most investors take risk and volatility into account when they allocate across asset classes and given the volatility in Bitcoin is around 3.7 times the volatility of gold it would be unrealistic to expect Bitcoin to match gold within investors’ portfolios in notional amounts,” they said.
When Bitcoin is compared to gold in “risk capital terms,” the implied allocation drops to $0.9 trillion, they said. This translates to a BTC price of $45,000, significantly less than the $70,000 price Bitcoin hit on Friday.
“At $66K currently, the implied allocation to Bitcoin within investor’s portfolios has already surpassed that of gold in volatility adjusted terms,” the analyst said.
When the volatility ratio of 3.7 is used to estimate the potential size of the Bitcoin ETF market, it implies a size of roughly $62 billion, they added, noting that the net inflow into spot BTC ETFs is currently around $9 billion.
"In our opinion, this is a realistic target of the potential size of spot bitcoin ETFs over time perhaps within a period of two to three years, though much of the implied net inflow could represent a continued rotational shift from existing instruments and venues to ETFs," the analysts said.
While both gold and Bitcoin are benefiting from rising expectations that the Federal Reserve will cut interest rates in 2024, with the both recording new record highs on Friday, Bitcoin has other tailwinds working in its favor, including the upcoming halving, which is predicted to occur around April 19.
