Is Bitcoin a Buy Right Now?

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Key takeaways

J.P. Morgan forecasts 10% base annual returns for Bitcoin over the next decade.
The projection outperforms expected returns for gold, bonds, and U.S. stocks.
J.P. Morgan warns that Bitcoin remains a volatile asset with a worrisome bear case.

Admittedly, it can be difficult to get behind Bitcoin (BTC -1.10%) right now. It's down 7% for the year and 35% from its all-time high of $126,000 last October. A spectacular August rally has fizzled out, and there's a relatively high probability that Bitcoin won't even hit $100,000 this year.

But what about the long-term outlook for Bitcoin? J.P. Morgan just delivered some fantastic news for crypto investors that should calm any fears about where Bitcoin might be headed over the next decade.

Bitcoin as the top-performing asset

According to J.P. Morgan Asset Management, Bitcoin could post 10% annual returns over the next decade. That's better than the performance of U.S. bonds, gold, large-cap stocks, or small-cap stocks.

In other words, Bitcoin will likely be one of the top-performing asset classes of the next decade. J.P. Morgan sees just 5.5% annual returns for gold, 6% annual returns for bonds, and 7.5% annual returns for stocks.

The best news of all is that 10% is the base case. In a bull case, Bitcoin will deliver annual returns of 17%. If that's the case, then Bitcoin could be trading as high as $400,000 by the end of the next decade. Coincidentally, $400,000 is the same price target that Coinbase Global CEO Brian Armstrong set for Bitcoin in 2030.

Caveats for investors

As they say on Wall Street, there's no such thing as a free lunch. And that, unfortunately, is the case with Bitcoin, says J.P. Morgan.

Unlike other investment firms that have made the case for Bitcoin as a unique portfolio diversifier, J.P. Morgan says Bitcoin is a risky, volatile asset with unstable correlations with major asset classes. It's nearly impossible to model for portfolio diversification purposes. And, given the lack of real fundamentals, Bitcoin is purely “a bet on fiat currency expansion.”

In other words, only invest in Bitcoin if you think the U.S. government is going to turn on the money printers. With a $40 trillion debt load, that might be the only way out of the current mess. And if that's the case, Bitcoin could provide “a hedge against monetary easing.”

Just keep in mind: The bear case for Bitcoin is truly worrisome. In a worst-case scenario, J.P. Morgan says Bitcoin could deliver annualized returns of -9.7% over the next decade. In other words, the price of Bitcoin could collapse entirely.

Long-time Bitcoin investors, of course, are well aware of this possibility. Throughout its 17-year history, there have been numerous drawdowns of 65% or more. Bitcoin has always been a boom-or-bust asset, so where's the plot twist?

When it comes to Bitcoin returns, the good years have always more than compensated for the bad years. And, if J.P. Morgan is right, then this will continue to be the case over the next decade. With that in mind, Bitcoin remains a buy at a deeply discounted price of just $82,000.

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