Here’s how much bitcoin is worth, says JPMorgan, as crypto faces this summer headwind


Stocks rose Thursday, extending gains as markets relax on inflation risks and precise details on the Fed’s news.

The cryptocurrency market declined significantly for the week, shedding $ 1 trillion in market cap from its high of $ 2.5 trillion in early May, said a group of analysts led by Nikolaos Panigirtzoglou of investment bank JPMorgan JPM, + 0.66%.

Panigirtzoglou and his team have ours Call of the daywhich gives Bitcoin a fair value of $ 23,000 to $ 35,000 in the medium term based on the relationship between its volatility and gold value as crypto faces new headwinds.

The signal for the latest major challenge facing Bitcoin, according to the investment bank’s team, is that the discount to net asset value for the largest Bitcoin fund – the Grayscale Bitcoin Trust – has widened deep into negative territory.

Chart via JPMorgan

This reflects the expected sale of shares in the trust in the secondary market as a lock-up period for investors ends.

“As the six-month lock-up period ends in June and July, these investors are likely to sell at least some of their GBTC shares, which is putting downward pressure on GBTC prices and Bitcoin markets in general,” the analysts said.

In a broader sense, the recent volatility and boom-and-bust dynamics of crypto are creating an obstacle to the adoption of crypto markets by institutional investors, said Panigirtzoglou and his team.

“The mere increase in volatility, especially when compared to gold, is an obstacle to further institutional acceptance as it reduces the attractiveness of digital gold over traditional gold in institutional portfolios,” the analysts said.

Based on the idea that institutional investors consider asset volatility when allocating capital, Panigirtzoglou and his team use a Bitcoin / Gold volatility ratio to measure the valuation of the crypto asset.

Chart via JPMorgan

JPMorgan sees a theoretical price target of USD 140,000 for Bitcoin, based on the convergence of Bitcoin volatility with Gold GC00, a volatility of -0.22% and the balancing of the Bitcoin and gold allocations in the investor portfolios.

But Bitcoin is on the way to the milestone of being six times as volatile as gold, which gives it a fair value of one-sixth of $ 140,000, or $ 23,000.

“The best we can hope for in the medium term is that this volatility ratio will partially return from around x6 to around x4 by the end of the year,” said the JPMorgan analysts. The fair value for Bitcoin at four times the volatility of gold is $ 35,000.

“Needless to say, full convergence or equalization of volatilities or allocations is unlikely any time soon,” said Panigirtzoglou and his team.

The graphic

Chart on the Irrelevant Investor Blog.

What is the relationship between Bitcoin and stocks like?

Michael Batnick of the financial blog Irrelevant Investor said he believed it was no coincidence that people were selling everything at once in 2020 – stocks, bonds, gold, and crypto – but don’t bet on a crypto crash that will deplete stocks.

Our chart of the day, courtesy of Batnick, shows the correlation between Bitcoin and the S&P 500 SPX, + 0.51% index.

“Sometimes when people talk about uncorrelated assets, they really want negatively correlated assets. Such a strategy is hard to come by, ”said Batnick. “With uncorrelated assets, you have to take the bad with the good.”

“Sometimes bitcoin moves with the exchange, and sometimes it doesn’t.”

The buzz

Elon Musk said he would try to take satellite internet company Starlink public as soon as revenues are predictable, likely in a few years. Reply to a user on Twitter TWTR, + 3.00%,
The billionaire CEO of electric car maker Tesla TSLA, + 5.33%, said “an earlier IPO would be very painful,” noting that he would do his best to give preference to long-term Tesla shareholders in an IPO.

On the U.S. economic front, 411,000 Americans registered as unemployed last week, just a slight decrease from 418,000 the week before and more than the 380,000 economists had expected, while there were 3.39 million jobless claims in the week of June 12, orders were down fell from -0.8% in the same period last year to 2.3% in May, as the US trade deficit rose 2.8% to 88.1 billion in May. The growth rate of the US economy in the first three months of 2021 calculated at 6.4% year-on-year, unchanged in the most recent revision. And Richmond Fed President Thomas Barkin said he believes US inflationary pressures are temporary, but the Federal Reserve needs to be careful and the central bank should watch prices closely.

The shares of data management company Confluent are expected to trade on the Nasdaq after the Mountain View, Calif.-Based corporation late Wednesday set its initial public offering well above its forecast range. Confluent has valued its shares at $ 36 each, which is above the company’s estimate of $ 29 to $ 33 last week.

The financial services company Visa has bought the fintech group Tink, an open banking platform, for 1.8 billion euros (2.15 billion US dollars) from the Swedish bank SEB.

John McAfee, the idiosyncratic software pioneer who developed the anti-virus software that bears his name, was found dead in his Spanish prison cell in an apparent suicide on Wednesday. His death came hours after a court approved his extradition to the United States to collect tax debts that potentially resulted in decades of imprisonment.

The markets

US stocks rose by noon DJIA, + 0.68% SPX, + 0.51% COMP, + 0.81%,
the brisk performance of European stocks SXXP, + 0.85% UKX, + 0.51% PX1, + 1.18% DAX, + 0.79% and stocks in Asia NIK, + 0.00% HSI, +0 , 23% SHCOMP, + 0.01% to join,
that lay firmly in the green.

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Dirty clothes to the moon: Astronauts don’t wash clothes in space – they wear clothes until they can’t stand the smell, and then throw them out to be burned in the atmosphere. NASA and detergent maker Tide have teamed up to change that.

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