JPMorgan "Bitcoin could reach $165,000 by year-end"

JPMorgan said Bitcoin (BTC) could reach $165,000 by year-end. It said Bitcoin remains undervalued on a volatility-adjusted value versus gold, and that a retail investor-led 'debasement trade' (trades to avoid currency value decline) is driving the market rally.

On the 3rd (local time), The Block reported that JPMorgan said in a report, "The volatility ratio between Bitcoin and gold has fallen below 2.0, leaving Bitcoin undervalued against gold by about $46,000." It said that with Bitcoin's current market capitalization of $2.3 trillion, matching the private investment size in gold (about $6 trillion) would require a rise of about 42%, which corresponds to a Bitcoin price of $165,000.

The report noted that Bitcoin was about $36,000 overvalued versus gold at the end of last year, but has now entered the opposite undervalued phase. "This mechanical calculation alone suggests significant upside potential for Bitcoin," it added.

JPMorgan also diagnosed that the 'debasement trade' is spreading in the market. With government fiscal deficits, inflation, geopolitical risk, weakening confidence in central banks, and emerging market currency instability combining, retail investors are pouring large amounts of capital into gold and bitcoin exchange-traded funds (ETFs).

Bitcoin ETFs recorded large inflows earlier this year and then slowed somewhat after August, but recently gold ETF inflows have been rising sharply, narrowing the gap. The report explained that institutional investors participate in the market via Chicago Mercantile Exchange (CME) futures, but the size of futures positions has not kept pace with ETF inflows, making the retail-led nature more evident.

With gold prices having risen sharply recently, JPMorgan analyzed that Bitcoin could be a relatively more attractive investment. As of last August it had set a year-end Bitcoin target of $126,000, but it raised the outlook to $165,000 reflecting the rebound in gold prices.