J.P. Morgan Asset Management has issued its first long-term return forecast for Bitcoin $BTC, projecting a 10% compound annual return against 5.5% for gold. The forecast comes with a caution
J.P. Morgan Asset Management has issued its first long-term return forecast for Bitcoin $BTC, projecting a 10% compound annual return against 5.5% for gold. The forecast comes with a caution that the cryptocurrency's volatility and unstable correlations with other assets remain obstacles to its widespread inclusion in investment portfolios.
The projection appears in the 31st annual edition of the firm's Long-Term Capital Market Assumptions report, and it is the first to include Bitcoin.The 10% figure covers a horizon of 10 to 15 years.That tops the firm's forecasts for U.S. large-cap stocks (7.5%) and gold (5.5%).Bitcoin's projection is 2.5 percentage points above U.S. large-cap stocks and 4.5 percentage points above gold.
The 10% figure is a base case rather than a guarantee. JPMorgan said the forecast was not a price target or a guarantee of outperformance, but a long-term planning tool.
Volatility is the main hurdle. The report pegs Bitcoin's annualized volatility at 55%, compared with about 17% for gold.That is more than three times the volatility of US large-cap stocks, according to Bloomberg.
Bitcoin is not yet included in the firm's main models for measuring how asset prices move together, though analysts introduced a separate model comparing it with a subset of other assets.Large price swings also explain why Bitcoin's arithmetic average return, at 20.9%, is more than double the compound figure investors would actually keep.
The bank sees room for change. Analysts could revise their approach as Bitcoin's volatility declines and its correlations with other assets stabilize, particularly as regulation becomes clearer and liquidity and price discovery improve. Those factors could support wider institutional use of $BTC.
Bitwise Chief Investment Officer Matt Hougan welcomed Bitcoin's inclusion but argued that JPMorgan's 55% volatility assumption is too high, which makes the return forecast too conservative.
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