JPMorgan, an investment bank, has estimated Bitcoin’s fair price at $38,000. This is 12% lower than the current price, which suggests that Bitcoin’s fair value may have been overvalued and could lead to a price drop.
Glassnode’s on-chain analysis shows a significant undervaluation relative to the 200-day moving mean. Contrary to JPMorgan’s assessment of the pattern, historical occurrences support price drawdowns or capitulation events.
Both entities seem to have a bearish outlook despite having opposing views about fair value assessment.
How did JPMorgan arrive at its assessment?
Nikolaos Panigirtzoglou, JPMorgan’s strategist, calculated Bitcoin’s fair price based on its volatility relative to gold.
The Bloomberg article did not include detailed calculations. They state however that the fair value of $38,000 is derived from Bitcoin being four times more volatile than gold.
A typical scenario is that an asset trading above its fair price will cause it to underperform and eventually return to its fair market value.
JPMorgan acknowledged that this assessment was highly dynamic. JPMorgan also believes that $BTC will have a lower volatility differential of three times gold’s, which will raise its fair value to $50,000.
According to the team, January’s price correction looks less like a capitulation event than May 2021’s crypto crash. But futures open and reserves point to a “worrisome trend in position reduction.”
Bitcoin Mayer Multiple analysis
Glassnode’s latest newsletter did extensive on-chain analysis in order to determine if Bitcoin is at its bottom.
The report evaluated a variety of metrics but the Mayer Multiple (MM) is the most pertinent metric to examine under/overvaluation.
The MM is calculated simply by dividing Bitcoin’s price by the 200-day average. The 200-day moving mean is widely accepted as a bullish or bear indicator. Deviations below this level indicate a degree undervaluation of the long-term average.
Glassnode reports that the MM trades at 0.8 right now, which is 20% lower than the 200-day moving mean. This indicates that the long-term mean is being undervalued.
“The Mayer Multiple traded below 0.8% this week. This represents a 20%+ discount relative the 200DMA. A Mayer Multiple of 0.8% is priced at $39.1k.
Glassnode points out that historical examples of MM trading at 0.8 and below often correlate with significant drawdowns in bear market markets.
This view is supported by the chart below, with the exception of January 2020 and March 2020 where the MM dropped below 0.8. However, these periods are not considered bear markets.
Glassnode believes there is some momentum behind the rally using other metrics. They caution against long-term holders cashing in and whether renewed demand will be available.
Different benchmarks can lead to contradictory estimates of over/undervaluation. JPMorgan used the actual price for their benchmark. Glassnode, on the other hand, used the 200-day moving mean.
JPMorgan: Bitcoin trading at a higher fair value What does this mean? CryptoSlate.
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