Bitcoin Faces Recent Declines Amidst Price Prediction
Leading cryptocurrency Bitcoin has been struggling with recent sharp and sudden declines. While some are wondering when BTC, which has been hit by these sharp declines in a short period of time, will rebound, banking giant JPMorgan has made a significant prediction.
JPMorgan's Bullish Forecast
JPMorgan has predicted that the price of Bitcoin (BTC) could reach around $170,000 within the next 6 to 12 months, The Block reported.
JPMorgan analysts led by Nikolaos Panigirtzoglou argued that Bitcoin could rise to around $170,000 within the next 6 to 12 months as leverage ratios are reduced and its relative volatility against gold increases.
Factors Influencing Bitcoin's Price
The analyst said that Bitcoin’s sharp drop of over 20 percent on October 11 was due to the consequences of heavy deleveraging in futures and the $128 million Balancer attack.
At this point, analysts noted that the deleveraging phase in futures trading, following the consecutive sell-offs in Bitcoin, is now largely over.
JPMorgan analysts also noted that the recent increase in gold volatility has made Bitcoin more attractive to investors on a risk-adjusted basis.
Analysts stated that the return of the leverage ratio to normal levels and the increase in volatility in gold have a positive impact on Bitcoin, and that the BTC price now appears to be undervalued compared to gold on a volatility-adjusted basis.
Bitcoin's Potential Valuation Against Gold
For Bitcoin to reach gold's private investment value, its price would need to rise by nearly two-thirds to $170,000, according to JPMorgan analysts.
At this point, Panigirtzoglou noted that Bitcoin has significant upside potential relative to gold on a volatility-adjusted basis over the next 6-12 months.
The Bitcoin-to-gold volatility ratio has fallen below 2.0, meaning Bitcoin is now consuming approximately 1.8 times more risk capital than gold.
This means that Bitcoin's current market value of approximately $2.1 trillion would need to increase by approximately 67% to cover the approximately $6.2 trillion in total private sector investment in gold.
The current Bitcoin price remains approximately $68,000 below its volatility-adjusted fair value relative to gold.
This means that theoretically the price of Bitcoin should be around $170,000.
*This is not investment advice.