For the banking giant JPMorgan the increase in the prices of the cryptocurrency only means the overvaluation of assets and it imitates the increase that Bitcoin had in 2017, just before its fall in 2018. His comment has received criticism
JPMorgan strategists have been warning investors about Bitcoin (BTC), despite the current bullish market. According to a recent investor note, BTC has moved ahead of its “intrinsic value”, mimicking its 2017 rise, before its fall in 2018.
BTC’s price (
For JPMorgan, the gains in the price of the cryptocurrency only mean the overvaluation of assets. In order to give the FUD (Fear, Uncertainty and Doubt) tactic an air of science, they were able to put a figure on the “intrinsic price”. According to JPMorgan, this is derived from treating BTC as a commodity and calculating its “production cost”.
According to the strategists:
In recent days, the real price has moved sharply above the marginal cost. This divergence between the real and intrinsic values has some resonances with the highest peak at the end of 2017, and at that time this divergence was mainly resolved by a reduction in real prices.
Of course, JPMorgan omits the fact that BTC does not behave like a basic product, since its offer is not only of fixed capital, but also of predictable and constant production, regardless market demand.
One Step at a Time
But this is not the first time that JPMorgan makes similar claims.
In fact, the bank’s spokesmen had the same opinion last February, when BTC was priced around US $4,000. JPMorgan explained that at that moment the “intrinsic value” was of only US $2,400, based on the “average cash price of a low-cost Chinese miner”.
However, all he actually draws is an approximate sketch of the profit margins for the miners.
Despite that, JPMorgan’s people were previously adamant that BTC had no “intrinsic value”, claiming that this value could only exist in a dystopian future.
EToro’s Senior Market Analyst, Mati Greenspan, considers very important JPMorgan’s step to finally admit BTC’s intrinsic value. Greenspan said that he was glad about that, and now he expects them to understand that miners with a surplus tend to hoard.
Many in the mining community have argued that the concept of “marginal cost” or “equilibrium point” is inaccurate. With a limited offer, these miners can only receive a larger part of that amount in comparison to other miners.
However, JPMorgan alludes to the challenge of defining a “fair value” for BTC and prefers to warn interested investors. One of its strategists warns:
Defining an intrinsic or fair value for any cryptocurrency is clearly challenging. Actually, the points of view range from some researchers arguing that it has no fundamental value to others estimating reasonable values well above current prices.
To conclude, it is important to warn investors that the JPMorgan has its own cryptocurrency, and attention must always be paid to the possible interests behind this type of analysis. However, they have to be careful not to make decisions solely based on a biased view of the panorama.
By Willmen Blanco