Bitcoin: An Inevitable Price Regression in Sight?
As the crypto market experiences a period of fluctuating valuations, JPMorgan analysts provide essential insight into the sustainability of this recovery. In a recent report, they expressed skepticism about the durability of the current rebounds, particularly for bitcoin.
A strategic rather than a sustainable rebound
According to JPMorgan analysts, the current rebound in crypto asset prices, particularly BTC, appears more tactical than indicative of a sustained bullish trend. Bitcoin is currently trading around $67,500. Analysts estimate that this BTC value is well above its estimated production cost of $43,000.
Furthermore, they use a special method to compare the crypto asset price to that of gold. Indeed, they adjust the prices by taking into account volatility, i.e., the price fluctuations of both assets. According to their calculations, the price of gold, when considering its volatility, would be around $53,000. They explain that the current price of bitcoin is quite high compared to this value, suggesting a regression towards this average.
In other words, in the long term, the major leaps in BTC price might be limited. The crypto asset would tend to stabilize around this gold comparison adjusted for volatility, according to them.
Impact of liquidations and political outlook on the markets
Analysts report that bitcoin futures contracts have recently been weakened by significant liquidations, notably by creditors of Gemini and Mt. Gox, as well as by the sale of bitcoins seized by the German government. These factors are temporary, according to them, and they anticipate a recovery of these futures contracts by August.
Moreover, they consider that the potential return of Donald Trump to the presidency could favor crypto assets and gold. Trump is seen as more favorable than the current Biden administration for the crypto sector.
Trump’s prospective trade policies could also encourage central banks in emerging markets to further diversify their reserves in gold. These political and economic developments could significantly reshape future market trends.
In summary, the immediate outlook for BTC and other cryptos seems promising. However, an overly optimistic interpretation of current trends would be detrimental. Analysts, therefore, recommend increased vigilance from investors.
