Large institutional investors are dumping bitcoin in favor of gold, analysts for J.P. Morgan Chase reported this week. The note from J.P. Morgan to its clients came as bitcoin hit five-month lows of about $30,000, Cointelegraph said. It’s a marked contrast from the bullish crypto market of last month, when bitcoin’s price rose above $64,000.
J.P. Morgan leveraged open interest data in bitcoin futures contracts from the Chicago Mercantile Exchange, and said the cryptocurrency’s futures now show the first biggest drop since the bull market that began late last year.
“The bitcoin flow picture continues to deteriorate and is pointing to continued retrenchment by institutional investors,” the report said. “Over the past month, bitcoin futures markets experienced their steepest and most sustained liquidation since the bitcoin ascent started last October.”
Nevertheless, the bank still holds to its previous forecast that shows bitcoin on track to hit $140,000 in the long term. “This $140,000 price should be thought of as a long-term theoretical target, assuming a convergence of bitcoin volatility to that of gold and an equalization of bitcoin allocations to that of gold in investor portfolios,” the investor note said.
According to J.P. Morgan, the current fair value for bitcoin — assuming a volatility ratio of bitcoin to gold — would be a quarter of $140,000, or $35,000. The bank in January predicted that bitcoin could conceivably become an alternative to gold, hitting $146,000 in the long term, but noted that this would be a “multi-year process.”
Meanwhile, a group of banking, payment and finance associations in China warned the industry this week to steer clear of digital currencies. “Financial institutions, payment institutions and other member units must earnestly strengthen their social responsibilities,” came the warning issued by the China Banking Association, the National Internet Financial Association of China, and the Payment and Clearing Association of China. “They must not use virtual currency to price products and services, underwrite insurance businesses related to virtual currencies or include virtual currencies in the scope of insurance liability, and must not directly or indirectly provide customers with other services.”