Bitcoin and cryptocurrencies have swept through Wall Street this year, with many of the world's largest banks launching crypto services.
The price of bitcoin has risen from around $15,000 per bitcoin this time last year to more than $60,000 today, causing "supple shocks" that analysts believe have grown stronger over the last month.
Now, banking behemoth JPMorgan has reaffirmed its long-term prediction that bitcoin will more than double to around $146,000, but has warned that bitcoin's extreme volatility could send its price sharply lower, giving bitcoin a fair value of only $35,000.
"This calls into question the notion that a price target of $100,000 or higher, which appears to be the current consensus for 2022, is a sustainable bitcoin target in the absence of a significant decline in bitcoin volatility," JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note to clients obtained by Business Insider. "While digital assets are on a multiyear structural ascent, the current entry point appears unappealing."
Many bitcoin and crypto market observers predict that the bitcoin price will reach $100,000 by the end of 2021, owing in part to inflation fears driving investors into so-called safe haven assets.
Concerns that inflation in the United States, which is now at a 13-year high, may be more than transitory prompted the Federal Reserve to begin scaling back its massive pandemic-induced quantitative easing program this week.
"The re-emergence of inflation concerns among investors during September/October 2021 appears to have renewed interest in the usage of bitcoin as an inflation hedge," JPMorgan strategists wrote. "Bitcoin's allure as an inflation hedge has perhaps been strengthened by the failure of gold to respond in recent weeks to heightened concerns over inflation."
Over the last year, the bitcoin price has increased by more than 300 percent, contributing to a $2 trillion increase in the total value of the cryptocurrency market.
"The resurgence of inflation concerns among investors in September/October 2021 appears to have renewed interest in the use of bitcoin as an inflation hedge," wrote JPMorgan strategists. "Bitcoin's allure as an inflation hedge may have been strengthened by gold's failure to respond in recent weeks to heightened inflationary concerns."
According to the bank's researchers, if bitcoin's volatility continues to fall, a price of $73,000 in 2022 is possible, but its wild swings mean that an increase of more than double its current $61,000, or even a drop to under $30,000, is also possible.
However, even a small amount of interest in bitcoin as an inflation hedge replacement for gold could result in a "big upside for bitcoin."
"Given the size of financial investment in gold, any such crowding out of gold as a 'alternative' currency implies big upside for bitcoin over the long term," Panigirtzoglou wrote, reiterating his previous long-term bitcoin price prediction of $146,000 per bitcoin.