Bitcoins leap echoes 2017 dramatic price swings: JPMorgan

Mubasher: Bitcoin’s recent current price pattern repeats its path seen nearly one year and a half ago, Bloomberg cited JPMorgan Chase analysts.

The digital currency climbed well beyond its “intrinsic value,” mirroring a similar pattern in 2017, which preceded a plunge later on, the US bank said in a Friday note.

After diving from its December 2017 peak of $19,000, and hovering below $4,000 most of the first quarter, the best-known cryptocurrency came to life again in April, after jumping beyond $5,000.

The rally carried through this month with gains of around 50%.

JPMorgan analysts based their conclusion on the hypothesis that Bitcoin was a commodity, calculating its “cost of production,” using inputs such as computational capabilities, electricity expense and hardware energy efficiency.

“Over the past few days, the actual price has moved sharply over marginal cost,” the JPMorgan note was quoted by Bloomberg.

“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.”

Bitcoin surged as much as 17% in early Asia trading on Monday. As of 9:10 am in London, the currency rose 11% to below the $7,900 level, according to Bloomberg composite calculations.

While it is challenging to establish a fair value for any digital currency, “views range from some researchers arguing that it has no fundamental value, to others estimating fair values well in excess of current prices,” the analysts said.