The recent price correction of Bitcoin has been brutal. And this has pushed Bitcoin below $40k again. This is the level that it took Bitcoin almost 3 months to break after the May 2020 crash. So, JPMorgan reduced its Bitcoin fair price estimate to $38k from $146k back in November. The institution says that the reason behind this is the changed market sentiment and an increase in market volatility.
J.P. Morgan and their price estimates
It is really difficult to understand what’s changed so much that J.P. Morgan’s fair price fell from $146k to $38k. Bitcoin has always been volatile, and it shouldn’t have lowered the expectation so much. Even in the past, J.P. Morgan said that the $150k price target was a long-term one. So, in that case, short-term ups and downs should not have mattered so much. But still, let’s see what they have to say about it.
J.P. Morgan says that if they keep a price target of $150k, then the Bitcoin to Gold volatility ratio would be around 2x, which is unrealistic. But reducing the same to $38k makes this around 4x, which seems likely. So, it’s clear that J.P. Morgan has been using different methods to calculate the Bitcoin fair price. They have also said that we could go lower with the current market scenario as there is no capitulation.
Volatility affects Institutional adoption
J.P. Morgan also says that if there is increased market volatility, then it won’t be good for market adoption. This is understandable as most companies would want some sort of predictability/stability in their portfolio. So, the chances that they will invest in Bitcoin or other crypto assets reduces to a huge extent. BTC has been following the 4-year cycles till now where there is a euphoric rise, then a fall, and repeat. This is going to hurt adoption, according to J.P. Morgan.
Then there is the uncertainty in regulation which is affecting the crypto markets. J.P. Morgan also called out the recent market correlation with the S&P500.
What are your thoughts as JPMorgan reduced its Bitcoin fair price to $38k? And do you think using different methods to measure the same metric is right? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.
Also Read: Economist Paul Krugman correlates crypto with the 2008 crash.
