The asset management bank opinioned Bitcoin’s valuation will keep on rising but will not reach the heights that most expect
The leading cryptocurrency Bitcoin is currently doing numbers over $60,000 after setting a new high. However, in a recent report to investors, the giant investment banking firm JPMorgan detailed that based on its price model, the fair value of Bitcoin is around $35,000. The multinational bank further said the coin could realistically reach the $73,000 mark of valuation, should the volatility shown by the digital asset reduce by half into the new year.
JP Morgan further observed that Bitcoin may not reach the significantly high numbers most people are predicting. The analysts said:
“This challenges the idea that a price target of $100K or above, which appears to be the current consensus for 2022, is a sustainable Bitcoin target in the absence of a significant decline in Bitcoin volatility.”
The bank analysts who penned the report explained that they expect the crypto to continue performing well in 2022, maintaining the view that the asset is on a “multiyear structural ascent.” With a look into additional alternative assets, JPMorgan said that these assets (including private debt, digital currencies, and private equity) would record an 11% return in the coming year, a figure more than double the 5% yield expected from stocks.
The bank also said it sees better returns from crypto (15%) as compared to the 12.5% figure from real estate, but warned that the extreme volatility of the asset class is making it increasingly unappealing to investors. Early October, JPMorgan, via a note to clients said that even with the massive fluctuations Bitcoin has seen this year, investors are finding it a better hedge for inflation in comparison to gold.
Evidence from the industry, more so the numbers crypto exchanges are recording, shows that this is the case due to the increased interest from institutional investors. As the month went on, another revelation from a JPMorgan team led by Nikolaos Panigirtzoglou attributed the rise in value Bitcoin saw late last month to inflation concerns rather than the SEC’s approval of the first Bitcoin ETF in the US.
“Instead, we believe the perception of bitcoin as a better inflation hedge than gold is the main reason for the current upswing, triggering a shift away from gold ETFs into bitcoin funds since September.”
Opinions on Bitcoin haven’t been any scarce and early last month, the bank’s CEO Jamie Dimon acknowledged that Bitcoin could well scale in value up to ten times over in a matter of five years. However, a crypto skeptic, the executive has maintained that he still wouldn't invest in it but would let the bank offer it to interested clients. The impact of what the CEO of a banking and asset management firm as huge as JPMorgan says could not be understated, but the bank has separately taken a kinder approach to crypto.