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- The bitcoin price hit a new high above $51,700 after braking the $50,000 mark on Tuesday.
- Yet JPMorgan said the rally looks unsustainable unless bitcoin’s volatility falls.
- BTC’s market capitalization has skyrocketed to close to $1 trillion.
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The bitcoin price hit a record high of above $51,700 on Wednesday, after soaring past $50,000 for the first time the previous day, bringing the biggest cryptocurrency’s market capitalization to close to $1 trillion.
Yet analysts at JPMorgan said in a note the rally looks unsustainable unless bitcoin’s volatility falls.
The bitcoin price (BTC) has rocketed around 75% in 2021, continuing an astonishing rally after dipping below $4,000 in March 2020. Its market cap has grown by more than $700 billion just since the end of September.
Bitcoin was up 5.2% to $51,607 by 6.50am ET on Wednesday, having earlier climbed to $51,718 on the Coinbase exchange.
Analysts say record amounts of monetary and fiscal stimulus are boosting the price by flooding markets with cash and creating fears about inflation and currency debasement.
Tesla’s announcement earlier in February that it had snapped up $1.5 billion of bitcoin in January has powered the latest leg of the rally. Interest from big Wall Street names such as BlackRock, BNY Mellon and Mastercard has also given cryptocurrencies legitimacy.
However, analysts at JPMorgan on Tuesday said that the high volatility of bitcoin remained a problem for the digital asset.
They said the cryptocurrency was far more volatile than gold, which many crypto enthusiasts are hoping bitcoin can replace as a store of value in investors’ portfolios. One measure, called 3-month realized volatility, was 87% for bitcoin compared to 16% for gold, they said.
“In our opinion, unless bitcoin volatility subsides quickly from here, its current price… looks unsustainable,” the analysts said.
JPMorgan also said that its analysis had showed the rapid rise in bitcoin over the last 5 months “has taken place with relatively little institutional flows.”
“Some pickup in real money flows would likely be needed to sustain current prices in the absence of a re-acceleration of the retail flow,” the note said.
