How Much Is Bitcoin's Fair Value? JPMorgan Analyst Weighs In

After a not-so-promising start to the year, Bitcoin BTC/USD prices have taken off since Friday. This has increased hopes for the apex cryptocurrency to emerge from the lackluster phase it has seen since it hit an all-time high of $68,789.63 on Nov. 10.

What Happened: Bitcoin's fair value is around $38,000, premised on the crypto's volatility vis-à-vis gold, Business Insider reported Wednesday, citing JPMorgan strategist Nikolaos Panigirtzoglou.

The fair value of an asset is the price of an asset as agreed upon by a buyer and seller who are under no compulsion to transact and have reasonable knowledge or relevant facts.

The JPMorgan analyst's valuation is based on the assumption that bitcoin's volatility is four times as much as that gold. Gold is considered a safe haven asset to which investors flock to in times of risk aversion or uncertainty.

JPMorgan's long-term price target of $150,000 for Bitcoin was derived based on the assumptions that the apex crypto's volatility is similar to that of gold and bitcoin gets the same allocation as that of gold in investors' portfolios.

Given the recent gyrations in Bitcoin, the JPMorgan analyst said its fair value would be worth one-fourth of his long-term price target.
Panigirtzoglou's $38,000 fair value is roughly 16% lower than Bitcoin's current price.

Related Link: Bitcoin Reigns Supreme, Still Accounts For 46% of the Total Value of Crypto Markets: Survey

Why It's Important: Bitcoin's rally in the past was supported by accommodative fiscal and monetary policies that left investors flush with funds. The Fed's signal that rate hikes are imminent has increased risk aversion, making risky bets such as cryptocurrencies less appealing.
Despite the recent recovery, Bitcoin and the other major cryptocurrencies appear to be on shaky ground, considering the macroeconomic uncertainties.

Cryptocurrencies will see hot growth relative to other alternative asset classes — not necessarily from continued rise in prices, but from the expansion of the universe of digital assets, Panigirtzoglou reportedly said.

At last check, Bitcoin was trading up 1.34% at $43,960. 

Related Link: This Republican Senator And Former Presidential Candidate Bought The Late January Dip In Bitcoin