Bitcoin's Rivalry With Gold Plus Millennial Interest Gives It 'Considerable' Upside Potential: JPMorgan

Writing to clients in "Flows & Liquidity," one of JPMorgan's flagship publications, the authors said that characterizing bitcoin as a "Risk" asset rather than a "Safe" asset is "More appropriate" based on the leading cryptocurrency's increased positive correlation with the Standard & Poor's 500 Index since March.

How investors currently perceive bitcoin's value implies that it could "Compete more intensely" with gold as an "Alternative" currency over the coming years, the analysts wrote.

Bitcoin's role as a gold competitor is amplified by Millennial investors' interest in cryptocurrency, according to the note, and the inevitability of the younger investor demographic becoming "Over time a more important component" of the investor universe.

Bitcoin's market capitalization would have to increase by a factor of 10 before it could match the total private sector investment in gold, the author's note, adding that "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."

"In other words, the potential long-term upside for bitcoin is considerable."

Beyond Millennial investor interest, the note highlights the significance of corporate and legacy investor interest giving credibility to bitcoin as an investment vehicle.

Specifically, PayPal's Wednesday announcement of support for bitcoin and alternative cryptocurrencies is "Another big step toward corporate support for bitcoin," according to the note.

The authors also identify "Strong growth" in institutional investor interest in bitcoin indicated by activity in CME futures and options markets.

According to the authors, the price of bitcoin and altcoins could appreciate significantly if adopted as means of payment.

Ultimately, even though bitcoin "Looks currently overbought for the near term," the authors reiterate that the potential long-term upside for bitcoin is "Considerable."