JPMorgan expressed his views on
Bitcoin’s fair value. Commenting on it, he said that Bitcoin’s “fair value” is 12 percent below its current price, according to its volatility in relation to gold. This calculation is based on the estimate that currently, bitcoin is four times more volatile when compared to that of gold. The analysis was carried out by Nikolaos Panigirtzoglou who remarked this on Tuesday, February 9. In that case, bitcoin’s value would be $38,000, a quarter of $150,000, they said.
However, if Bitcoin was three times as volatile as gold, then the “fair value” of this decentralized currency would be around $50,000, the strategists added in their statement.
According to data from CoinMarketCap,
the value of Bitcoin is still down 8 percent so far this year, even though it traded 1.8 percent higher on the day the comments were made, rising its value to around, $43,564, which was the highest for a month JPMorgan.
JPMorgan has set up a long-term target for bitcoin. As opposed to the one from the last year which was priced at $146,000, the target for this year is priced at $150,000. This target is based on the assumption that the volatility level of Bitcoin meets the volatility level of gold, or alternatively, bitcoin allocations get the same weighting as gold in investor portfolios.
The bank however thinks, that this target in unlikely to be achieved any time soon. This will be the case given that such a neat intersection between gold and bitcoin JPMorgan may not happen in the foreseeable future.
Bitcoin saw a rough start this year,
with the overall cryptocurrency market slumping. This was because the adrenaline rush for risking assets declined against a backdrop of persistently high inflation and the Federal Reserve’s increasingly hawkish stance. The leading cryptocurrency saw a fall below $36,000 and Ether also tumbled down the rocks below $2,500- that too, from their high records of around $63,000 and $4,800, respectively.
The reason for this major craze for cryptocurrency in the last two years was the surplus amounts of cheap cash that emanated from the various fiscal and monetary stimulus programs during the pandemic, and with the life going back on normal trend, this driver is also progressing towards it end. JPMorgan said in January’s crypto market correction, wherein Bitcoin lost 17% in value, looks more like an extended period of decline, when compared to last May when Bitcoin fell 35%.
JPMorgan said cryptocurrencies are seeing fast and trendy growth in relation to other alternative assets, but this does not necessarily have to bud from continually rising prices, with the strategists still holding Bitcoin’s volatility one of its biggest challenges, saying it turns off institutional investors from investing.
“This growth does not necessarily need to come from continuous price appreciation of existing cryptocurrencies such as bitcoin and Ethereum, already popular among institutional investors, but in our mind it is more likely to come from the expansion of the universe of digital assets,” the strategists added further.