Cryptocurrency bitcoin could start to compete with gold as an alternative currency as millennials start to age, according to a note from JPMorgan analysts.
Payment company Paypal’s decision last week to allow customers to buy and sell bitcoin using their Paypal accounts is “another big step towards corporate support for bitcoin”, the client note from JPMorgan managing director for global market strategy Nikolaos Panigirtzoglou said.
Sufficient corporate backing for bitcoin would help “facilitate and enhance over time millennials’ usage of bitcoin as an ‘alternative’ currency”, the note said.
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Older investors still look to gold as an alternative currency, whereas younger investors prefer bitcoin. Both gold and bitcoin exchange-traded funds have experienced strong inflows this year as young and old investors alike see the case for an alternative currency, Panigirtzoglou wrote.
As millennials age, bitcoin could become a more important asset class with a potential for positive impact on its price, the analysts argued.
The total market capitalisation for bitcoin is $240bn, which is greater than the total size of gold ETFs at $210bn, but is dwarfed by the total stock of privately held gold, which stands at about $2.6tr.
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“Even a modest crowding out of gold as an ‘alternative’ currency over the longer term would imply doubling or tripling of the bitcoin price from here,” the note said.
The bitcoin price passed $13,000 after Paypal’s endorsement last week and in the short-term the cryptocurrency “looks rather overbought and vulnerable to profit taking”, the note said.
However, in the long term the price of bitcoin could rise as it receives more corporate backing and millennials age and grow in importance as investors.
“The potential long-term upside for bitcoin is considerable as it competes more intensely with gold as an ‘alternative’ currency,” the note said.
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