Bitcoin's declining volatility could make it more attractive to institutional investors: JPMorgan

• JPMorgan analysts stated that Bitcoin's falling volatility makes it more appealing to institutional investors.
• The bank predicts that capital inflows into Bitcoin could match those of gold, but requires a 13% increase in its market capitalization.
• The analysts added that Bitcoin could see more upside and is currently undervalued by $16,000.

Bitcoin's (BTC) reduced volatility could attract more institutional capital, as it has become undervalued relative to gold, according to JP Morgan analysts in a note on Thursday.

Bitcoin undervalued by $16,000, could see increase in institutional interest

Bitcoin is undervalued compared to gold, as its volatility has hit historic lows, said JPMorgan analysts led by Nikolaos Panigirtzoglou, in a note on Thursday.

The analysts noted that Bitcoin's six-month rolling volatility has dropped from nearly 60% at the start of the year to about 30%, the lowest level ever recorded. They suggest that Bitcoin's declining volatility could enable it to attract more institutional capital, with the potential to match that of gold.

"Expect that the allocations to Bitcoin by institutional investors could match those of competing asset classes such as gold if there is convergence in volatilities," the analysts wrote.

JPMorgan analysts noted that Bitcoin's market cap would need to increase by about 13%, placing its price near $126,000, to match gold's $5 trillion in private investment on a volatility-adjusted basis. 

The bank highlighted that the gap between Bitcoin's price and its volatility-adjusted comparison to gold has shifted sharply over the past year, adding that the top crypto is undervalued by about $16,000. This indicates further upside as Bitcoin is still trading about 10% below its record high set earlier in August, the note states.

JPMorgan analysts also suggested that a major factor for Bitcoin's declining volatility has been the sharp increase in adoption by corporate treasuries over the past year. The move has reduced market activity and slowed down Bitcoin's volatility, as more institutions are piling the crypto in passive reserves.

Bitcoin is changing hands at $112,200 at the time of publication on Thursday, up 1% over the past 24 hours.