After a long period of stagnation, the Bitcoin share price has risen rapidly in recent weeks. While investors are dreaming of a new rally, JPMorgan warns that the current price jump is very reminiscent of that of late 2017 – which ended with a massive crash.
Latest Bitcoin development
After the Bitcoin’s impressive recovery in recent weeks, investors are hoping that a rally like the one that took place at the end of 2017 could be repeated. At that time the value of a Bitcoin had shot up to almost 20,000 US dollars within a few months. However, the rapid rise was immediately followed by the fall. Within a few days, the exchange rate fell below the US$ 10,000 mark. The 52-week high for the digital currency at the end of 2018 was 3,178.3301 US dollars. All the more enthusiastic was the news that the best known crypto currency cracked the US$ 8,000 mark again on May 15, 2019. Bitcoin has thus recorded a plus of 112.77 percent since the beginning of the year (closing price on 21 May 2019). However, since the cracking of this important brand, the coin has once again shown its usual volatility.
Bitcoin Course Reminds of 2017
In this volatility, JPMorgan believes to recognize a familiar pattern. To determine this, strategists of the US investment bank, including Nikolaos Panigirtzoglou, would have treated Bitcoin as a “commodity” to determine the “intrinsic value”. For this, the strategists included data such as estimated computing power, power costs and hardware energy efficiency, as Bloomberg reports.
Actual value vs. intrinsic value
When the Bitcoin and Altcoin prices rose rapidly in the past few days, it would have been very similar to the development in 2017: “During the last few days, the actual price has risen drastically above the marginal cost,” the analysts wrote, and further “This deviation between actual and intrinsic values shows parallels to the price swing upwards at the end of 2017. At that time, this deviation was largely eliminated by reducing the actual price”. Accordingly, the current price jump of the Bitcoin is quite comparable with the end of 2017. However, this also means that a downward price adjustment will soon follow, as the coin is currently overbought in terms of assessment. Although the price fell to below 7,000 US dollars shortly after the Bitcoin cracked the 8,000 US dollar mark, the market was talking about profit taking. Incidentally, the setback cannot be compared with the enormous loss in value within a very short time in 2018.
Bitcoin value calculation proves difficult
However, the strategists relativized their calculation somewhat. For example, it is very difficult to determine the intrinsic value of a crypto currency. In addition, the researchers’ opinion on this question would differ widely. While some assume that fair values could be far above actual prices, others believe that crypto currencies have no underlying value.
Thus, it cannot be ruled out that the price slide implied by JPMorgan will not occur. Nevertheless, analysts at the US bank are not the only ones warning about the volatility of cyberdevise. Shapeshift boss Erik Voorhees also said that Bitcoin would experience many more bubbles.