• Bitcoin could stage a monster rally in 2021 to as high as $100,000, but pricing at that level "would prove unsustainable," JPMorgan said in a note on Monday.
  • "We believe that the valuation and position backdrop has become a lot more challenging for bitcoin at the beginning of the New Year," JPMorgan said.
  • At its current market cap of $575 billion, bitcoin would have to surge to $146,000 to match the total private sector investment in gold via ETFs or bars and coins, according to the note.
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Bitcoin's 300% surge in 2020 could reach similar levels this year, but such a move higher would prove unsustainable, JPMorgan said in a note on Monday.

"While we cannot exclude the possibility that the current speculative mania will propagate further, pushing the bitcoin price up towards the consensus region of between $50k - $100k, we believe that such price levels would prove unsustainable," the note said.

Bitcoin surged to nearly $35,000 on Sunday before plunging as much as 17% on Monday in its steepest drop since March. 

JPMorgan still sees bitcoin competing against gold as an "alternative" currency, with the millennial investor population driving demand for they cryptocurrency as they prefer the "digital gold" over traditional gold. 

And with a market value of $575 billion, bitcoin would have to surge to $146,000 to match the total private sector investment in gold via ETFs or bars and coins, according to the note. 

But that long-term upside target based on bitcoin becoming as valuable as the gold market is predicated on institutions becoming comfortable with the volatility associated with the crypto asset as it occupies a place in their portfolios. For risk management purposes, a less volatile bitcoin would likely lead to increased adoption among institutions.

"It is thus unrealistic to expect that the allocations to bitcoin by institutional investors will match those of gold without a convergence in volatilities. A convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is in our mind a multi-year process," JPMorgan explained.

"We believe that the valuation and position backdrop has become a lot more challenging for bitcoin at the beginning of the New Year," JPMorgan said.

One analyst who sees bitcoin also hitting $100,000 is Fundstrat's Tom Lee, who said last week that the crypto asset could quadruple in 2021 as it experiences a similar parabolic rally like it did in 2017.

Read more: The space industry will grow by over $1 trillion in the next decade, says Bank of America. Here are the 14 stocks best-positioned to benefit from the boom.

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