Over the past few weeks, Bitcoin’s volatility has dropped markedly, making cryptocurrency a more attractive investment for large companies. Experts from JPMorgan bank have no doubt about this, who previously published a long-term goal for BTC of $ 130 thousand per coin.
As the bank explained, the rise in institutional adoption of cryptocurrency – that is, the entry into the niche of professional investors – «is likely to arise from the recent restructuring of Bitcoin relative to traditional asset classes.» That is, in general, experts have become even more confident in the good prospects of the cryptocurrency.
Recall that volatility is a statistical indicator that characterizes the volatility of an asset’s price. That is, the greater the volatility, the greater the amplitude of price fluctuations and the higher the risks of investing in cryptocurrency.
In this case, analysts portray the reduction in volatility as a plus for investors, and this point of view is easy to understand. The fact is that Bitcoin and other coins are usually very volatile, that is, their rates change too abruptly and often. This situation is significantly different from the world of stocks and other classic assets, which may well show several percent of annual growth – and this is considered the norm.
In this regard, many professional investors simply bypassed the same BTC, since they had heard about its ability to fall and rise. However, the asset has stabilized lately. And this can play into his hands, according to the representatives of the bank.
What to expect from cryptocurrencies in the future
One of the biggest obstacles to introducing cryptocurrency into the investment portfolios of large players was its noticeably high volatility, which increased sharply in 2020 against the backdrop of more than three times the price of BTC. In terms of risk management, high volatility «is an obstacle to further institutional implementation,» analysts at JPMorgan say.
However, now there are all the signs that the volatility of Bitcoin is normalizing, and this will help to «revive» the interest of professional investors in cryptocurrencies and force them to include coins in their portfolio. Notably, one of the assets that has been negatively impacted by the growing popularity of Bitcoin is gold. Since mid-October, $ 20 billion has already been withdrawn from funds investing in gold, while over the same period, the inflow of funds into cryptocurrency funds amounted to $ 7 billion.
Here’s a quote from JPMorgan as they share their analysis of what’s going on. The replica is provided by Business Insider.
Considering how large the financial investment is in gold, any crowding out of gold as an “alternative” currency implies great potential for BTC to grow in the long term.
Capital outflow from gold funds and inflow into the crypto market
That is, experts believe that the development of cryptocurrency and its popularization in the world will not end there. This means that other well-known companies will want to buy Bitcoin and other coins in the future. For example, after the investment in BTC by Tesla representatives, speculations appeared on the network about the possible purchase of cryptocurrencies by Apple’s management.
In general, it is easy to understand the reluctance of investors to keep money in gold. Here is a graph of the precious metal’s behavior over the past year. Its peak growth is 15-20 percent, while Bitcoin has grown more than tenfold in a year. Naturally, cryptocurrency has become a more attractive option for investing money here.
JPMorgan has concluded that Bitcoin has upside potential of at least 120 percent more from current levels. The cryptocurrency may rise in price up to 130 thousand dollars before the start of a new bearish cycle, analysts say.
This fact will have a positive impact not only on the rest of the crypto market, but also on companies working with digital assets.
According to CB Insights, 129 startups in the cryptocurrency industry received $ 2.6 billion in funding in the first quarter of this year alone . This figure is higher than the amount of funds raised by crypto startups for the whole of 2020: it amounted to $ 2.3 billion.
The growth was fueled by several large rounds of funding for players like BlockFi Inc., Dapper Labs Inc. and Blockchain.com, Bloomberg reports. Overall, funding increases as Bitcoin reaches record highs and companies like Tesla make direct investments in BTC.
Volumes of venture funding of crypto startups in different years
We believe that what has been happening in the cryptocurrency niche over the past year is really changing the way people think about digital assets. Now it is not a «common speculation tool» that crashes after reaching a new high. Now Bitcoin and cryptocurrencies in general are able to change the idea of \ u200b \ u200bthe world of finance and change this industry for the better. Therefore, there are a lot of ways to develop coins and projects using them.