The bank said if bitcoin fails to break $40,000 soon, its momentum will continue to decay until the end of March
Despite its meteoric price rise and record highs in January, bitcoin is likely to close out 2021 at no higher than $35,000, according to cryptocurrency bulls at JPMorgan.
The investment bank’s team of analysts made headlines earlier this month with a prediction of a multi-year $146,000 price target for bitcoin, using calculations that compared it to holdings of gold as a similar risk asset.
However, strategists metered those expectations in a 22 January note to say that 2021 might be a different story. Instead, they forecast a fair-value range for bitcoin of between $11,000 and $35,000 this year.
The world’s largest cryptocurrency reached a peak of almost $42,000 earlier this month, but has since fallen to around $33,000 on 25 January after experiencing its worst week since March 2020.
A return to around $40,000 seems difficult to achieve in the near future, strategist Nikolaos Panigirtzoglou wrote, because the pace of institutional and retail demand now “appears to have peaked” based on four-week rolling averages.
“Bitcoin, at current market prices, has already almost equalised with gold in risk capital terms. In our opinion, unless bitcoin volatility subsides quickly from here, a price level of close to $35k should be considered as an upper bound of its fair value range at current levels of volatility,” he wrote.
Panigirtzoglou added that unless a “significant decline in bitcoin volatility” occurs in 2021, a price in the region of between $50,000 and $100,000 is an unsustainable target for this year.
The Grayscale Bitcoin Trust, a popular fund for monitoring institutional interest in bitcoin, slid more than 22% in the last fortnight.
Panigirtzoglou said that bitcoin faced a similar problem in November last year, when if it had failed to surpass the $20,000 milestone, its value would have naturally decayed until the end of January and created a negative environment for the currency. Instead, institutional demand – from trusts such as Grayscale at the time – is what kept bitcoin above water.
As such, he noted that “if its price fails to break out above $40,000 soon, the momentum signals would keep decaying till the end of March”.
“In all, while bitcoin is currently trading within our fair-value range of between $11,000 and $35,000 (at current levels of bitcoin volatility), the apparent peaking of the flow pace into the Grayscale Bitcoin Trust and a mechanical decay of our momentum signal till the end of March, both imply that the near-term balance of risks is still skewed to the downside,” he added.
“In the long term, our theoretical price target of $146,000 is conditional on bitcoin volume converging to that of gold, which is not only likely to be a multi-year process but would also depend on bitcoin ownership becoming more institutional and less retail over the coming years.”