Bitcoin’s biggest challenge is its volatility and the boom and bust cycles that hinder further institutional adoption, JPMorgan said in a research report.
- The bank’s fair value estimate for bitcoin (BTC) based on the volatility ratio of bitcoin to gold fell to around four times, or $38,000, analysts led by Nikolaos Panigirtzoglou wrote in the note published last week.
- JPMorgan said its previous forecast of the bitcoin-to-gold ratio falling to around two times now seems unrealistic. The bank sees significant headwinds for both bitcoin and ether.
- The challenge for ether (ETH) is different from that for bitcoin because ether derives most of its value as a “decentralized application currency rather than a form of digital gold,” JPMorgan said.
- The Ethereum blockchain is facing challenges due to declining market share in the decentralized finance (DeFi) and non-fungible-token (NFT) sectors, the bank said. During this month’s market correction, Ethereum failed to recapture market share from its main competitors, with ether prices falling by a similar magnitude compared with smaller alternative coins (altcoins), the bank added.
- Similar to last May, unwinding of leveraged futures contracts played a significant role in the crypto market correction in recent weeks, the bank said, but this month’s unwinding of positions seems less severe.
- Bitcoin was trading around $37,244 as of publication time.
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