Many investors are taking a closer look at Bitcoin (CRYPTO: BTC) as it faces unchartered territory.
The potential of rising interest rates is a phenomenon that cryptocurrencies have not yet seen in their existence. Though, it is looking more likely after the United States consumer price index hit a staggering 7.5% year-over-year increase last night.
Today, the Reserve Bank of Australia (RBA) has acknowledged the surprisingly hit figure. RBA Governor Philip Lowe responded by recognising that a rate increase this year may now be ‘plausible’.
Despite this, recent research from JPMorgan suggests there could still be a pathway to new all-time highs for Bitcoin.
So, where could Bitcoin be heading from here?
Short term pain before a long term gain
In the past week, the price of Bitcoin has rallied nearly 17%, recuperating some of the ground lost between November and January. However, in a recent report from JPMorgan research analyst Nikolaos Panigirtzoglou, there could be more downside in the short term.
According to the report, Bitcoin should be fairly valued at around US$38,000. Interestingly, the analyst bases this on a comparison of volatility against gold.
Panigirtzoglou highlights that because Bitcoin is four times more volatile than the precious metal, its price target is US$38,000. Moreover, if the cryptocurrency was able to reach parity to gold on a volatility basis, then its fair value would be US$150,000.
As such, the analyst applied a long-term price target of US$150,000 on Bitcoin. Although, this would be reliant on it gaining more mainstream acceptance — an outcome that would presumably reduce volatility.
Is Bitcoin correlated with other investments?
Cryptocurrency advocates have long touted cryptocurrency — namely Bitcoin — as an uncorrelated asset class. Essentially, this means its performance is relatively untethered to other investments such as shares, real estate, etc.
More recently, the behaviour of the long-standing cryptocurrency has started to resemble that of tech shares. In the chart below, Bitcoin moved counter to the S&P/ASX All Technology Index (ASX: XTX) back in March 2021.
However, the pair began moving more synchronously in November last year.
Nonetheless, some crypto experts believe the correlation will be short-lived. Bitcoin strategist at Validus Power Corp, Greg Foss, reckons the similarity in performance will separate in the future.
Foss said:
Bitcoin eventually will be viewed as insurance and, therefore, will de-correlate from the rest of the assets.
The post Could Bitcoin (CRYPTO:BTC) be eyeing off a $150,000 future? appeared first on The Motley Fool Australia.
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Motley Fool contributor Mitchell Lawler owns Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin. The Motley Fool Australia owns and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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