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JP Morgan warns that Bitcoin’s intrinsic value still remains below market price

  • JP Morgan recently issued a report that warns that there is still a downside risk when it comes to crypto trading.
  • The bank's strategist claim that Bitcoin's intrinsic value remains below the current market price, which makes investments risky at this time.
  • Despite this, many believe that BTC is about to enter into another bullish period, particularly due to increased adoption and upcoming halving.

Bitcoin price has been performing in a rather positive way during the first two weeks of 2020, which led many to assume that the market is finally turning and that a bullish period might soon arrive. However, according to a recent report by JP Morgan, this is still not the case, as Bitcoin’s intrinsic value — an estimate of its actual true value — still remains below the coin’s market price.

According to the bank strategists’ recent note, the gap between the two values has yet to close. What this means is that there is still downside risk, and traders and investors need to be aware of it.

As JP Morgan analysts reported, Bitcoin’s market price dropped by 40% from its peak. At the same time, the coin’s intrinsic value grew by 10%. Of course, the bank’s strategists were treating BTC as a commodity in order to calculate its intrinsic value, and they looked at the marginal cost of the coin’s production — mining.

This included details such as the cost and amount of electricity that was needed, as well as computational power which is decided by the mining difficulty and other aspects.

Bitcoin price to surge due to increased adoption

Other reports, such as the one published by Bloomberg Intelligence, expect the coin’s price to surge as 2020 continues. The company’s senior commodity strategist, Mike McGlone, recently noted that Bitcoin is seeing more and more adoption. This, in combination with its fixed total supply (21 million BTC) is more than likely to see the increased appreciation of BTC, and therefore, the growth of its value in 2020.

Another detail worthy of note is that Bitcoin options trading is currently in high demand. After Bakkt launched it in the second half of 2019, the demand increased enough that many other companies decided to do the same.

Crypto derivatives platform FTX launched Bitcoin options trading for its clients, and CME Group is doing the same today.

About the author

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Ali Raza
A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications. Raza is the co-founder of 5Gist.com, too, a site dedicated to educating people on 5G technology.

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