JPMorgan Claims Bitcoin is below its ‘Fair Price’ by 28%
The recent market downturn has shown to be a major deterrent factor for retail traders, especially for Bitcoin, coupled with the major crisis in the Terra (LUNA) ecosystem that led to huge liquidations in the market. However, in spite of these events, one of the top banking organizations, JPMorgan, speculated that Bitcoin (BTC) is still highly undervalued.
This recent declaration is, however, in contrast to the statement by its CEO, Jamie Dimon, when cited Bitcoin to be “worthless” about seven months ago.
In a report released by JPMorgan to its top investors last Wednesday, they recalled their previous evaluation of Bitcoin in February when it traded at around $43,000 while still maintaining its fair value of $38,000. Currently, Bitcoin is trading at around $31,000, which is approximately 28% below the fair price of $38,000, according to JPMorgan.
It was also disclosed in the report that they regarded Bitcoin (BTC) as a recommended alternative asset to gold or even real estate. To put it in a broader perspective, alt-assets are assets that are neither bonds, cash nor stocks. This statement is also surprising and controversial for many reasons.
Earlier in the month, the Terra (LUNA) community saw a huge downward spiral with its native token, LUNA, crashing to zero and its algorithmic stablecoin, UST, losing its 1:1 peg with the US dollar to less than a cent.
Do Kwon, the founder of Terra, used up his Bitcoin reserves to defend the integrity of the ecosystem. But this move backfired in increasing the vulnerability of the entire ecosystem. The Terra crash, in turn, led to a further crash of Bitcoin to below $28,000, and in a very short period, the cryptocurrency market valuation, which was more than $3 trillion, snowballed to $1.26 trillion, according to CoinMarketCap.
However and notwithstanding the current volatile situation of digital assets, JPMorgan pitches Bitcoin as a better alternative. In their words,” a potential lagged repricing keeps us more cautious on private equity, private debt and real estate over the coming quarters.”
Also, Nikolaos Panigirtzoglou, leader of strategy at the bank, noted in his report that the recent market correction appears to be a capitulation when compared to January/February market performances. He also stated that there would be more upside runs for the general cryptocurrency market.
The Role of VC Funding
After the LUNA incident, JPMorgan strategists are skeptical about the entrance of VC funding into the cryptocurrency financial market. This skepticism is backed by the previous 2018/2019 ICO boom that ushered in a long “winter” in the space. Venture Capital funding, therefore, is a high determinant factor in sealing the confidence of their clients.
However, this is not a strong reason because VC funding is still strong. In recent weeks, Andreessen Horowitz (A16z), a huge venture company, announced that it had raised $4.5 billion for its fourth crypto fund.
Earlier this year, JPMorgan opened a virtual lounge called Onyx Lounge in the blockchain-based world Decentraland, making it the first bank in the metaverse. An assessment by the bank pointed out that the metaverse has a market opportunity of $1 trillion in yearly revenue as more integrations between the digital and the physical world happen.
They also stated that digital creators such as entertainment providers would be gainful while they focus on their main goals in the verse, which are “cross-border payments, foreign exchange, financial assets creation, trading and safekeeping.”