Yahoo Finance JP Morgan estimates bitcoin's fair value
For the first time ever, US investment bank JP Morgan Chase & Co (JPM) has attempted to valuate the world's largest cryptocurrency, bitcoin (BTC-USD).
The "fair value" of the crypto world's so-called liquid gold is around 12% below its current price. This is based on bitcoin's volatility in comparison with gold, JP Morgan said.
Strategists led by analyst Nikolaos Panigirtzoglou, estimated bitcoin's fair-value level at around $38,000 (£27,996) based on the cryptocurrency being around four times as volatile as gold.
They estimated that the fair value would increase to $50,000 in a scenario where the volatility differential narrows to three times.
"The biggest challenge for Bitcoin going forward is its volatility and the boom and bust cycles that hinder further institutional adoption,” the strategists wrote in a note published on Tuesday.
Looking ahead at bitcoin's long-term theoretical target, Panigirtzoglou is putting it at a level that would put the crypto's total market value in line with that of all privately held gold for investment purposes. This is at $150,000 – up from $146,000 a year ago.
The strategists noted January’s price correction looks less like a capitulation than the one seen in May 2021, which saw bitcoin's price plunge as much as 50%, prompted by a clampdown on crypto-trading in China and a tweet by Tesla (TSLA) boss Elon Musk, who said that the electric-vehicle maker would stop accepting payments in bitcoin.
Despite that, metrics like open interest futures and reserves on exchanges are now pointing to a "more long-standing and thus more worrisome position reduction trend" since November.
Open interest is the total number of outstanding derivative contracts, like futures or options that have not been settled for an asset.
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The valuation comes after bitcoin finally shrugged off weeks of blues earlier this week, breaking the key $40,000 threshold for the first time in almost a month.
Bitcoin, which has been fluctuating over the last few weeks, jumped to a high of $43,701 before retreating slightly on Monday.
The crypto was 0.6% lower to $43,628 (£32,124) on Wednesday around 11AM in London. Meanwhile, its closest rival in terms of market value, Ethereum (ETH-USD) was up 0.9% to $3,137.
On Tuesday, the US justice department arrested a married couple for money laundering and fraud after the seizure of $3.6bn in allegedly stolen bitcoin.
The stolen cryptocurrency was linked to a 2016 hack of virtual currency exchange Bitfinex. The funds stolen by a hacker who breached Bitfinex were initially valued at about $71m, but with the surge in the bitcoin's value it is currently valued at over $5bn.
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