Don’t Count on a Crypto Market Rebound, Says JPMorgan
According to a recent analysis by JPMorgan, investors should be prepared for any short-term crypto market rebound to be short-lived. The bank highlights that the price of Bitcoin is too high compared to its production cost and its volatility-adjusted comparison to gold.
JPMorgan attributes this prediction to several factors. Firstly, the recent interest rate hikes by central banks, particularly the US Federal Reserve, continue to weigh heavily on risky assets, including crypto. The restrictive monetary policy aims to control inflation but also reduces liquidity in the financial markets, which tends to deter investments in more volatile assets like Bitcoin and Ethereum.
Furthermore, the recent price movements of major cryptocurrencies have shown a downward trend until a recent violent rebound. JPMorgan suggests that this indicates a structural weakness in the market and hesitancy of investors to take long-lasting positions. The volatility remains high, which discourages institutional investors from making significant commitments.
JPMorgan points out that the price of Bitcoin is currently too high compared to its production cost, estimated at $43,000, and its volatility-adjusted cost in comparison to gold, which is $53,000. At the time of publication, BTC is trading around $67,600. This overvaluation could limit the sustainability of any short-term rebound.
Increased attention from regulators, particularly in the US with the SEC, has added an additional layer of uncertainty. Investors fear that strict regulations may hinder innovation and sector growth.
Both Bitcoin and gold are expected to benefit from the increased likelihood of a Trump electoral victory. Some investors perceive a second Trump term as more favorable to crypto companies and cryptocurrency regulation, unlike the current Biden administration.
There are rumors that Donald Trump may announce Bitcoin as a strategic reserve asset at the Bitcoin conference in Nashville this week, which could trigger an impressive price surge.
