Bitcoin stable at $7,750 after JPMorgan says another bubble is forming

Markets have slipped back 2% or more as bitcoin fails to hold at $8,200 mark, after JPMorgan says bitcoin is substantially overvalued

BTC is currently trading at $7,769, down 1.9%

The drop from around $8,200 this morning was fairly rapid with some citing a report from US investment bank JP Morgan as the culprit..

The JP Morgan client note revealed by Bloomberg has been doing the rounds since yesterday and may have had some impact on sentiment, but the bullish case is likely still in tact.

Although the research comes with caveats on how to value bitcoin, it concludes that it is someway above fail value.

It calculates fair value as the break even cost of mining the digital currency.

Here’s the chart that accompanied the research. It suggests fair value is somewhere around 4700, which is some way off where we are today.

JPM analyst Nikolaos Panigirtzoglou wrote in the note: “Over the past few days, the actual price has moved sharply over marginal cost.”

The part that may have unnerved some in the market was the parallel drawn with the 2017 bubble.

“This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices,” said Panigirtzoglou.

However, if you were to take the digital gold valuation approach is has much much further to go, for a price of approximately $300,000.

The JPMorgan view aligns with the trading thoughts of Peter Brandt, who does not take a view on the valuation method for bitcoin.

In a chart he tweeted the day before bitcoin launched its bounce back to 8000, he postulated a fall to around 4200, based on the chart technicals not mining costs.

Other market participants can take encouragement from Tom Lee of FundStart Global Advisers who says definitively that the “crypto winter” is over.

12 million tune in for CBS bitcoin coverage

Last night US TV network CBS’s 60 Minutes saw coverage of crypto and bitcoin reach 12 million viewers, in a highly anticipated event by the crypto community that was taken of a sign of renewed interest in the sector in the mainstream.

Banks sink $50 million into settlement coin in bad news for XRP

Other positive news came from an exclusive Reuters report that 12 global banks are investing $50 million in developing a “utility settlement coin” through a project called Fnality.

Some of the banks involved in the project include UBS, Banco Santander, Bank of New York Mellon Corp, State Street Corp, Credit Suisse Group AG, Barclays PLC, HSBC Holdings Plc and Deutsche Bank AG.

A Barclays press statement said: “We are a member of the USC [utility settlement coin] Project and can confirm that the Research & Development phase is coming to an end.”

Although Ripple greeted the announcement earlier this year of the JPM Coin from JPMorgan with the shrug of the shoulders, this latest indication that banks may prefer to develop their own crypto tech is not good news, especially for XRP.

About the Author

Gary McFarlane
Gary has been writing about cryptocurrencies since 2013 and currently works as the cryptocurrency analyst at interactive investor, the UK's second-largest online investment platform. Gary contributes for Coin Intelligence News in a personal capacity and none of his commentary should be considered investment advice. Gary is the winner of the ADVFN International Financial Awards 2018 Cryptocurrency Writer of the Year. Contact Gary on twitter at: @gary_mcfarlane

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