Bitcoin rally warns JPMorgan - Southern Business Review

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Monday, May 20, 2019

Bitcoin rally warns JPMorgan

Bitcoin’s rise from the ashes over the past two months is showing similarities to the boom of late 2017, according to analysts at JPMorgan Chase & Co.
Having opened the year around $3,500, bitcoin, BTCUSD, +1.18%  the best-known cryptocurrency, spent the first few months treading water. But in early April — seemingly out of nowhere — the cryptocurrency surged around 100% in around six weeks, putting bitcoin back on the map after a torrid 18 months.
But, analysts at JPMorgan have warned that the rapid rise has pushed the price of the digital currency above its intrinsic value, something not seen since late 2017. “As a result, over the past few days, the actual price has moved sharply over marginal cost,” wrote Nikolaos Panigirtzoglou, global market strategist at JPMorgan.
“This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices together with some increase in intrinsic values.”
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The bank calculated its intrinsic value using inputs such as computer power, hardware efficiency and electricity expense — all features that translate to the creation of bitcoin.
Bitcoin v intrinsic value
The commentary on bitcoin from JPMorgan comes as the bank’s CEO has been a vocal skeptic of cryptocurrencies. Back on 2014, JPMorgan CEO Jamie Dimon labeled bitcoin a ‘terrible store of value,’ and called it a ‘fraud.’
But in February, JPMorgan JPM, -0.25% launched its own digital currency: JPM Coin, not a bet on bitcoin per se, but an experiment on the utility of blockchain, the technology that underpins all cryptocurrencies.
However, JPMorgan’s latest report sparked further criticism from some industry leaders. Anthony Pompliano, founder and partner at Morgan Creek Digital said in a tweet Monday: “JP Morgan is now putting out reports about ‘bitcoin’s intrinsic value.’ Thought it was worthless and had no value according to Jamie Dimon?? Never listen to what a bank says. Watch what they do.”
The bank didn’t offer a price prediction for bitcoin in its report.
In Monday trade, a single bitcoin fetched around $7,800, up more than 100% since the beginning of the year.