Analysts at JPMorgan Chase (JPM) say that Bitcoin’s (BTC) fair value is $170,000 U.S.
The largest U.S. bank forecasts that Bitcoin will reach $170,000 U.S. or beyond within the next six to 12 months despite facing current headwinds.
A JPMorgan team led by strategist Nikolaos Panigirtzoglou writes that the recent deleveraging in crypto derivatives, particularly Bitcoin futures, is behind the current downturn in Bitcoin.
The bullish report comes with BTC trading right around $100,000 U.S., having fallen from an all-time high of $126,000 U.S. at the start of October.
However, JPMorgan’s model suggests that Bitcoin is trading far below where it should be when adjusted for risk.
The bank’s model assumes Bitcoin consumes 1.8 times more risk capital than gold and given the $6.2 trillion U.S. in private investments in gold, Bitcoin’s market capitalization needs to grow by two-thirds to match that exposure.
The calculation implies a price of $170,000 U.S. for Bitcoin. Currently, Bitcoin is roughly $70,000 U.S. below the gold-based fair value benchmark, Panigirtzoglou writes.
JPMorgan Chase also downplays worries of a sustained slump for cryptocurrencies, writing that we’re likely in a temporary pullback for risk assets.
Still, Panigirtzoglou and his team acknowledge that their projection isn’t based on investor sentiment or momentum. “This is a mechanical exercise,” writes the team.
