The world's most popular cryptocurrency, Bitcoin, has been a topic of discussion for many, especially after a recent comment by the global banking giant, JPMorgan. The bank's strategists suggest that Bitcoin could be a new way to avoid currency debasement. With governments worldwide printing money to soften the economic impact of the pandemic, many fear that traditional currencies could lose their value. In such a scenario, Bitcoin could offer an alternative.
According to JPMorgan, Bitcoin's potential long-term upside is considerable if it competes more intensely with gold as an 'alternative' currency. They believe that Bitcoin would have to become substantially equivalent to gold's current value to match private sector gold investment. Currently, Bitcoin's market capitalization is 0.18% of the total gold investment, suggesting plenty of room for growth.
However, JPMorgan also points out that Bitcoin has some significant hurdles to overcome. For Bitcoin to start displacing a portion of gold's investment flow, it will need to become more accepted by institutional investors, which requires greater regulatory clarity. Bitcoin's extreme volatility also makes it less attractive to many investors.
Interestingly, Bitcoin's popularity has been growing among millennials, who are more open to digital currencies. They see Bitcoin as 'digital gold' rather than traditional gold, which is often seen as a 'safe haven' asset. If this trend continues, Bitcoin could see increased adoption as an alternative currency.
Despite the challenges, Bitcoin's potential cannot be ignored. As governments continue to print money, the fear of currency debasement grows. In such a scenario, Bitcoin, with its limited supply and decentralized nature, could provide a viable alternative. However, for this to happen, Bitcoin needs to overcome its hurdles, especially in terms of regulatory clarity and acceptance by institutional investors.