Strategists from JPMorgan Chase & Co are now suggesting that the value of Bitcoin has risen too quickly these last weeks. As such, they warn that a Bitcoin crash may follow – as the cryptocurrency’s price has surged above its ”intrinsic value”.
This warning comes as many are once again turning bullish on cryptocurrencies
This news comes from a fresh Bloomberg report, which details potential pitfalls with the recent spike in Bitcoin prices. The cryptocurrency sector as a whole has seen stellar performance over the past weeks, led by a massive Bitcoin rally.
Furthermore, some observers guide even larger gains, as signs indicate the next crypto bull run could be the biggest yet. At the same time, the stock market could be facing a looming recession, which could drive more investors to cryptocurrencies.
Nevertheless, this recent Bloomberg report suggests that the latest Bitcoin rally may have been too intense. According to a note by, among others, JPMorgan Chase & Co strategist Nikolaos Panigirtzoglou, Bitcoin may have exceeded its ”intrinsic value”.
Specifically, this analysis is based on considering Bitcoin as a traditional commodity and calculating its ”cost of production”. In this case, production factors are the energy requirements and computational power needed to mine the premier cryptocurrency.
Could the Bitcoin rally end in a Bitcoin crash?
Moreover, the analysis finds that the sudden Bitcoin rally seen over the past weeks could pose a hazard. Bitcoin’s recent performance is supposedly akin to the bull run in 2017, which was followed by a Bitcoin crash.
”Over the past few days, the actual price has moved sharply over marginal cost. This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”
However, coming up with an ”intrinsic value” for a cryptocurrency will likely face criticism. The value of Bitcoin, just like any other cryptocurrency or fiat currency, is not synonymous with the production value.
As such, predicting a ”Bitcoin crash” simply based on a divergence between production value and the market price, is likely misguided. In fact, the JPMorgan Chase & Co note goes on to acknowledge this:
”Defining an intrinsic or fair value for any cryptocurrency is clearly challenging. Indeed, views range from some researchers arguing that it has no fundamental value, to others estimating fair values well in excess of current prices.”
This is clearly in reference to some of the more lofty cryptocurrency price predictions out there. For example, the famed billionaire investor Tim Draper has notoriously predicted a Bitcoin price of $250,000 by 2023. As such, there is no shortage of bullish cryptocurrency predictions clearly contradicting any notion of an impending Bitcoin crash.
Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.