Investment bank J.P. Morgan confirms: Bitcoin price rally mimics that of 2017

Since early April, the bitcoin price has increased by 92 percent. At the time of writing, the world’s biggest cryptocurrency is trading at $7,874, according to Coinmarketcap.

During the latest rally, bitcoin has now also surged beyond its “intrinsic value”, which mirrors how the cryptocurrency behaved during the big rally in 2017.

This according to analysts at the American investment bank J.P. Morgan, Bloomberg reports.

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The fundamental value

The intrinsic value, in this case, is the value of a currency based on fundamental analysis, but without reference to its market value.

The analysts at J.P. Morgan came to his conclusion by partly classifying bitcoin as a commodity and partly calculating the “cost of production” of the cryptocurrency. Parameters that the analysts included in the calculation were computational power, electricity costs and hardware energy efficiency.

“Over the past few days, the actual price has moved sharply over marginal cost. This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices”, the analysts write in a note.

“Carries some echoes of the spike higher in late 2017”

At the same time, the J.P. Morgan analysts write that it is difficult to determine an intrinsic value for cryptocurrencies.

“Defining an intrinsic or fair value for any cryptocurrency is clearly challenging. Indeed, views range from some researchers arguing that it has no fundamental value, to others estimating fair values well in excess of current prices”, the analysts write, according to Bloomberg.

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