FOR the first time, JPMorgan Chase has calculated what it says is the true value of Bitcoin, the world’s most popular cryptocurrency.
According to a report published Tuesday, the US bank estimates that the digital coin’s “fair value” is $38,000 (£28,000).
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That’s 12 per cent below the current price of $43,950 (£32,400) – suggesting that Bitcoin is valued more highly by the market than it’s truly worth.
JPMorgan – which is led by longtime Bitcoin sceptic Jamie Dimon – said its valuation is based on the cryptocurrency’s volatility in comparison with gold.
Strategists led by Nikolaos Panigirtzoglou determined that Bitcoin is currently around four times more volatile than gold.
Were its volatility to drop to three times that of gold, the currency’s value would be closer to $50,000, they estimated.
“The biggest challenge for Bitcoin going forward is its volatility and the boom and bust cycles that hinder further institutional adoption,” the strategists wrote.
As by far the biggest cryptocurrency, Bitcoin trends can have ripple effects across the world of crypto.
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The risks of buying with cryptocurrencies
Investing and making a purchase in cryptocurrencies such as Bitcoin is risky .
Their value is highly volatile and City watchdog the Financial Conduct Authority has warned investors should be prepared to lose all their money.
Investing in cryptocurrencies is not a guaranteed way to make money.
You should also think carefully about making purchases with a cryptocurrency.
For example, Bitcoin has had wild price fluctuations in recent months and the price can change on an almost hourly basis.
The price of a Bitcoin was at $40,258 on January 9, according to Coindesk, but fell to $34,214 just three days later.
That’s a 15% drop.
These price swings are risky for a business as you could sell an item for a Bitcoin at one price and the value may drop soon after, leaving you with less money from a sale.
Similarly, the price of Bitcoin has soared by more than 21% since the start of this week so it can be hard for a shopper to get an accurate idea of the price of an item if its value changes on a daily basis.
The coin has struggled recently amid uncertainty in the US economy, with the Federal Reserve discussing hiking interest rates in March – sooner than expected.
JPMorgan’s valuation follows a crypto crash at the start of December, shortly after Bitcoin hit a record value of $69,000 in November.
Bitcoin has now lost nearly half of that value.
As a result, the global cryptocurrency market has shed more than $1trillion since November, according to Bloomberg.
Bitcoin is a virtual currency that was created in 2009 by an unknown computer whizz using the alias Satoshi Nakamoto.
Unlike physical currencies such as pounds, dollars or euros, which come in physical notes and coins, it isn’t printed or minted.
Instead, Bitcoin tokens are a digital-only form of payment and are “mined” using high-powered computers.
Its value has fluctuated wildly since its launch.
It’s not the first time that JPMorgan has taken aim at the cryptocurrency.
Last year, the firm’s Chief Executive Officer Jamie Dimon branded Bitcoin “effectively worthless” while speaking at an online event.
The 65-year-old added that, while he was sceptical of cryptocurrencies, JPMorgan clients were still free to invest in them.
“I don’t want to be a spokesperson – I don’t care. It makes no difference to me,” he said.
“Our clients are adults. They disagree. That’s what makes markets.
“So, if they want to have access to buy yourself bitcoin, we can’t custody it but we can give them legitimate, as clean as possible, access.”
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In other news, a four-tonne chunk of a SpaceX rocket is on a collision course with the Moon, according to online space junk trackers.
Boeing has sunk $450million into a flying taxi startup that hopes to whisk passengers across cities by the end of the decade.
Personalised smart guns, which can be fired only by verified users, may finally become available to U.S. consumers this year.
And, scientists are embarking on a mission to unravel the mystery behind dozens of grisly child mummies buried in an underground tomb in Sicily.
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This post first appeared on Thesun.co.uk
