JPMorgan Reveals Bitcoin’s ‘Biggest Challenge’—Along With A Surprise Bitcoin Price ‘Fair Value’

After soaring through much of last year, it has had a difficult start to the year.

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After hitting a low of $32,000 per bitcoin in January, the price has recently bounced back, climbing over $45,000 for the first time in over a month.

According to the banking giant, the "fair value" of the virtual currency is far lower than its current price, and warned that its boom and bust cycles are its biggest challenge when it comes to institutional adoption.

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Wall Street giant JP Morgan has warned of the difficulties of institutional adoption of the digital currency.

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According to a note to clients this week, the biggest challenge for bitcoin going forward is its volatility and the boom and bust cycles that hinder further institutional adoption.

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The calculations are based on the difference between the two, with gold being four times as volatile. If the volatility differential is less than three times gold's, the price fair value is $50,000. In the long term, the prediction of $150,000 for the price of the virtual currency is the same as all gold held privately for investment purposes.

"With no fundamental value, like commodities, stocks or bonds have, it's a purely speculative asset that's influenced by investor interest," said Alex Kuptsikevich, a senior financial analyst at FxPro.

Its price is determined by crowd interest and not by volatility. Without investor interest, it quickly goes sour, and with it, it picks up again. The reduced supply growth rate is in favor of the digital currency.

Over time, the price of the virtual currency is becoming less volatile, which could increase its appeal to institutional investors.

The entry of institutional investors, the increasing acceptance of bitcoin as an asset for portfolio diversification, and the increased trading turnover in cryptocurrencies make the price less volatile over time, according to the report. This is not comfortable for retail investors.

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Over the last year, the price of the virtual currency has swung wildly, hitting a peak of almost $70,000 per coin.

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Despite putting bitcoin's fair value under its current price, the analysts at JP Morgan are more bullish than they were during the most recent crash in May last year.

According to the data, institutional investors took profits and reduced their holdings in January. In February, investors came back. The largest amount of money since December flowed into the funds last week.

The first U.S. bitcoin futures exchange-traded fund launched in New York in October, but didn't last. The first of its kind to start trading and debut to record-setting demand, the ProShares Bitcoin Strategy fund absorbed over $1 billion in two days but the pace of growth cooled.

Source: www.forbes.com