Bitcoin emerges as strong rival to gold

Digital currency Bitcoin has emerged as a strong rival to gold and could trade as high as $146,000 if it establishes itself as a safe-haven asset, investment bank JP Morgan (JPM) has claimed.

Interest in the world's biggest crypto currency has soared this year with investors viewing Bitcoin as a hedge against inflation and an alternative to the depreciating dollar. The rush led to bitcoin prices more than tripling in the past six months to a record peak of $34,800 on Jan. 2.

"Bitcoin's competition with gold has already started in our mind," the Wall Street bank's strategists said in a note citing recent $7 billion outflows from Gold and more than $3 billion of inflows into the Grayscale Bitcoin Trust.

That could mark a new dawn for the volatile digital currency after years as a play for speculators and retail punters. "Considering how big the financial investment into gold is, a crowding out of gold as an 'alternative' currency implies big upside for bitcoin over the long term," JP Morgan added.

Bitcoin is likely to outshine gold as millennials become a more important component of the investment market over time and given their preference for ‘digital gold’ over traditional bullion,  the investment bank added. With a market capitalisation of $575 billion, the price of the Bitcoin would need a nearly fivefold jump to $146,000 to match the value of private gold wealth held in gold bars, coins or exchange-traded funds, the bank's note added.

Strategists at JPM said that the upside is conditional on the volatility of the Bitcoin converging with that of gold in the longer term. Though the bank sees the possibility of ‘current speculative mania’ propelling Bitcoin to between $50,000 and $100,000, it warned that such levels would prove unsustainable until its volatility levels out.