Bitcoin Gains Value in Its Interplay Between Facets, Suggests JPMorgan
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Bitcoin Gains Value in Its Interplay Between Facets, Suggests JPMorgan

JP Morgan's stance on Bitcoin has changed a lot in previous years, so this recent announcement wasn't a huge surprise.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Breaking BTC’s historical threshold of being adopted by the world’s biggest payment processing platform has its own domino effects. After Mode Global Holdings PLC, Square, and many other institutional investors poured funds into Bitcoin (BTC), JPMorgan is the latest to hop on the bullish BTC train.

JPMorgan Changes Stance on Bitcoin

Although people tend to be suspicious of banking behemoths such as JPMorgan Chase, with $3.37 trillion worth of assets under management, the bank has a solid track record.

After news broke out last week that BTC achieved a major adoption milestone thanks to PayPal, JPMorgan conferred to BusinessInsider another prognosis regarding BTC:

“The potential long-term upside for bitcoin is considerable as it competes more intensely with gold as an ‘alternative’ currency we believe, given that Millenials would become over time a more important component of investors’ universe.”

Bitcoin’s Measure of Value

This was not always the case. In fact, JPMorgan’s stance on the very concept of cryptocurrencies was in the opposite direction. If you recall, JPMorgan’s CEO, Jamie Dimon, likened BTC to fraud in 2017. Specifically, he said:

“I don’t personally understand the value of something that has no actual value.”

For the longest time, this has been a common refrain. The underlying implication is that for a currency to have value, it has to be backed by the might of the government. More so, even if something arises to have value, such as BTC, can it ever compete with the power of government?

In other words, what would happen to BTC if tomorrow the government comes up with its own digital currency?

There are several nuances at play in this discussion, as was famously articulated in a popular debate between Peter Schiff vs. Erik Voorhhes. In the annals of the perennial debate between the value of gold vs. bitcoin, the talking points remain the same:

  • Bitcoin is too speculative to be a store of value.
  • When people buy gold, they buy it as a protection against inflation, i.e. the devaluation of USD.
  • When people buy BTC, they buy it as a quick-money-making scheme.
  • As an alternative currency, BTC has greater utility than gold.
  • Bitcoin’s penetration relies on the blessing of the government.
  • If Bitcoin is blessed by the government, i.e. heavily regulated, wouldn’t that strip it of one of its key features, such as privacy, which would make it less of an alternative to fiat money?
  • Bitcoin is a piece of code while gold is a physical precious metal.

JPMorgan Suggests Millennials May Drive Bitcoin Adoption

As Bitcoin continues to mature, it becomes clear that the emerging digital asset has a unique set of characteristics, however. It is certainly true that Bitcoin has many facets—of which the function of digital gold is only one of them. In their note on Friday, JPMorgan acknowledges Bitcoin’s multifarious nature—as both a store of value and a payment method.

This combo creates a unique feedback effect in which the more people adopt BTC, the more it will be used as a store of value. This certainly seems to be the case with millennials, especially now with another post-PayPal bull run. However, BTC has a long road ahead to usurp gold as the king of value storage.

Bitcoin’s current market cap sits at around $241 billion. After correcting for jewelry and gold’s electronic application, gold’s market cap lies between $2.5 and $3 trillion. This means that Bitcoin has to surge by 10-12 times in order to come shoulder to shoulder with gold as a store of value.

However, as this process continues, even from the current humble beginning, JPMorgan now projects that BTC will keep surging in price. Considering that BTC is only 11 years old, this bodes well for its future.

Are you worried that the Federal Reserve’s digital currency will usurp BTC’s status, or will BTC follow its own trajectory unimpeded? Let us know in the comments below.