Bitcoin's Undervaluation: A Strategic Case for Reaching $126,000 by Year-End

The case for Bitcoin’s undervaluation has gained formidable momentum in 2025, driven by a confluence of volatility normalization, institutional adoption, and structural shifts in capital markets. JPMorgan’s volatility-adjusted models now suggest that Bitcoin’s fair value is approximately $126,000—a 13% premium over its current price—based on its narrowing risk profile relative to gold. This analysis hinges on three pillars: the decline in Bitcoin’s volatility, the emergence of corporate treasuries as a stabilizing force, and the normalization of crypto assets in institutional portfolios.

Volatility Normalization: A New Equilibrium

Bitcoin’s volatility has plummeted to levels not seen in a decade. The six-month rolling volatility metric, a critical barometer for institutional investors, has dropped from nearly 60% at the start of 2025 to around 30% by mid-2025 [1]. This decline has brought Bitcoin’s volatility to just twice that of gold, the narrowest gap in recorded history [2]. Such normalization is not accidental but the result of deliberate structural changes. Regulatory clarity—exemplified by the U.S. CLARITY Act and the EU’s MiCA Regulation—has reduced uncertainty around custody and compliance, while DeFi and CeFi platforms have improved liquidity and transaction efficiency [3].

JPMorgan’s models further argue that Bitcoin’s market cap should align with gold’s $5 trillion private investment market on a volatility-adjusted basis. At current levels, Bitcoin’s market cap is $16 trillion below this benchmark, implying a $126,000 price target [4]. This calculation assumes continued volatility compression, a trend reinforced by the growing participation of corporate treasuries.

Corporate Treasuries: Anchors of Stability

The role of corporate treasuries in Bitcoin’s valuation cannot be overstated. By Q2 2025, firms holding Bitcoin had accumulated over 6% of its total supply, with entities like MicroStrategy, Tesla , and Harvard University treating the asset as a strategic reserve [5]. These holdings act as a stabilizing force, reducing speculative pressure and aligning Bitcoin’s valuation with long-term capital allocation strategies. For instance, Harvard’s endowment, which added 10,000 BTC to its portfolio in 2025, now holds a diversified mix of equities, real estate, and crypto, reflecting a broader institutional shift toward multi-asset risk management [6].

The Trump administration’s establishment of the Strategic Bitcoin Reserve further underscores this trend. By treating Bitcoin as a macroeconomic hedge against inflation and currency devaluation, the U.S. government has legitimized its role in national financial planning [7]. Such moves reduce Bitcoin’s perceived risk premium, making it more attractive to institutional investors who previously shunned it as a speculative asset.

Institutional Capital Flows: A Quiet Revolution

The normalization of Bitcoin in institutional portfolios has been accelerated by the approval of spot Bitcoin ETFs. BlackRock’s iShares Bitcoin Trust (IBIT), for example, attracted $132.5 billion in assets under management by mid-2025, with professional investors accounting for 22.9% of U.S. Bitcoin ETF AUM [8]. This inflow has been further amplified by the inclusion of Coinbase Global in the S&P 500 index in May 2025, granting indirect exposure to crypto through traditional equity funds [9].

While Ethereum ETFs have outperformed Bitcoin ETFs in Q2 2025 due to staking yields and technological upgrades, Bitcoin’s institutional adoption remains robust. JPMorgan and other banks have begun allocating to Bitcoin ETFs, with institutional holdings growing by 57% to $33.4 billion in Q2 [10]. This trend is not merely speculative; it reflects a recalibration of risk-return profiles in a low-yield environment. Bitcoin’s volatility-adjusted Sharpe ratio now rivals that of gold, making it a compelling alternative to traditional safe-haven assets [11].

The Road to $126,000

The path to $126,000 by year-end is not without risks. Ethereum’s structural advantages—4–6% staking yields and improved scalability—have diverted some institutional capital, and concerns about liquidity concentration persist [12]. However, the broader macroeconomic context favors Bitcoin. With global central banks prioritizing inflation control and long-term capital preservation, Bitcoin’s role as a hedge against fiat devaluation and a store of value in a digital age is increasingly difficult to ignore.

JPMorgan’s $126,000 target is not a speculative flourish but a mathematically grounded projection. It assumes continued volatility compression, sustained institutional inflows, and a broader acceptance of Bitcoin as a legitimate asset class. For investors, the question is no longer whether Bitcoin deserves a place in the portfolio but how much of it to allocate—and how soon.

Source:
[1] JPMorgan Says Bitcoin Is 'Undervalued'—But By How Much?
[2] Bitcoin's Quiet Transformation: Why $126K Feels Inevitable
[3] Bitcoin Institutional Adoption: How U.S. Regulatory Clarity...
[4] JPMorgan Eyes $126K Bitcoin by 2025, Says Price Is Too ...
[5] A New Era of Institutional Adoption and Regulatory Clarity
[6] Inside the 13F Filings of Bitcoin ETFs Q1 2025 ...
[7] The S&P 500 Just Embraced Crypto: Here's How It Affects ...
[8] A Deep Dive into ETF Inflows and Allocation Dynamics
[9] Financial Advisors Become Big Bitcoin Buyers
[10] The Great Rebalance: How Institutional Capital is Shifting
[11] Bitcoin Undervalued Compared To Gold, Fair Value At ...
[12] Institutional Bitcoin Investment Hits New Milestone in 2025