Bitcoin is very expensive; Its fair value is $ 25k, say JPMorgan strategists ⋆ ZyCrypto

Bitcoin is trading at twice its fair value, analysts at the largest bank in the United States have said. In its latest report, JPMorgan said it valued the highest crypto’s fair value at $ 25,000. The report also looked at Tesla’s effect, why Tether is BTC’s greatest extreme risk, the rise of CBDCs, and what the future holds for cryptos.

Bitcoin is overvalued

The February 18 report is the latest from JPMorgan to offer insight into the world of fintech, blockchain and digital currencies. This comes at a time when Bitcoin is hitting a new all-time high and receiving approvals from the world’s leading investors and innovators.

However, according to JPMorgan strategists, Bitcoin is an economic side-show. The real story lies in the rise of digital finance, declared the sixth largest bank in the world. Nonetheless, the best crypto will continue to fight for its place alongside gold as an alternative currency. To match the market value of gold, BTC would need to trade at $ 146,000, the report added. To achieve this price, institutional investors would have to take control of the market.

“Bitcoin’s appeal and competition with gold as an ‘alternative’ currency will likely continue as millennials become a larger component of the investor universe and show their preference for ‘digital gold’ compared to traditional gold.

Analysts further claimed that BTC was very overvalued. It has already overtaken gold in terms of venture capital. Its fair value is $ 25,000, less than half of its current price of $ 57,235. Its mining cost of $ 11,000 is the lower limit of its fair value range.

“In fact, it can be argued that the price of $ 25,000 that equates Bitcoin with gold in terms of venture capital could be seen as an upper bound on its fair value range, as that price is already ahead ( at current volatility levels) all long-term upside for Bitcoin resulting from institutional adoption in real money ”, the report said.

JPMorgan has further poured cold water on the narrative that Tesla is pushing more companies to invest in Bitcoin. The bank believes Tesla is an outlier and most companies still view Bitcoin as too volatile to invest.

Today’s bubble, tomorrow’s innovation

It is too early to judge whether cryptos are a financial innovation or just a speculative bubble, the bank said. However, despite this, Bitcoin recorded the fastest price appreciation ever for any asset in history. Gold in the 70s, Japanese stocks in the 80s, tech stocks in the 90s, Chinese stocks in the 2000s and FANG stocks in the 2010s are all pale compared to crypto, according to the report.

Unexpectedly, many of them were initially viewed as mere speculative bubbles. However, over time they have become some of the best assets to own. “The bubble of a decade can become the innovation of the next decade”, the analysts remarked.

The report also explored why USDT is Bitcoin’s biggest tail risk. It is a financial risk in which an unlikely event occurs that results in the sharp loss in value of an asset. JPMorgan believes that Bitcoin’s trading volume is too dependent on the USDT. Citing data from asset manager NYDIG, the bank claimed that 50% to 60% of BTC trades against USDT.

“A sudden loss of confidence in the USDT would likely generate a severe liquidity shock, jeopardizing access to the largest demand and liquidity pools”.

Tether claims the USDT has 1: 1 support from US dollar reserves and other assets. However, as the report observed, it has not yet been proven by an independent audit.