Despite the crypto slump, banking giant JPMorgan says bitcoin is massively undervalued.
Maintaining its estimate of bitcoin’s fair value at $38,000, the bank today reiterated the assessment it gave the asset in February when the cryptocurrency was trading around $43,400. This price ($38,000) is approximately 28% higher than the current $29,757.
In a note to clients issued Wednesday, the bank has also stated that it is replacing real estate with digital, or crypto, assets as its preferred alternative asset class along with hedge funds, citing “potential lagged repricing” in private equity, private debt and real estate. Alternative assets typically refer to investments that aren’t stocks, bonds or cash.
The appraisal is a nod of confidence to bitcoin, which is currently trading at less than half its all-time high of $68,721, and the broader category in general. In addition to rising interest rates and the fallout from the war in Ukraine, the cryptocurrency market is grappling with the $60 billion collapse of algorithmic stablecoin TerraUSD and its sister token LUNA. The total market capitalization of cryptocurrencies currently sits at $1.3 trillion—a dramatic decline from $3 trillion in November.
“The past month’s crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally,” the bank’s strategists, led by Nikolaos Panigirtzoglou, noted in the report.
The strategists also believe that “the trajectory for VC funding would be crucial in helping the crypto market to avoid the long winter of 2018/2019”, which followed the initial coin offerings boom. Just today, Ethereum scaling startup Starkware raised $100 million at an $8 billion valuation and venture capital powerhouse Andreessen Horowitz announced that it had raised $4.5 billion for its fourth crypto fund.
“Thus far there is little evidence of VC funding drying up post-Terra’s collapse. Of the $25 billion VC funding year-to-date, almost $4 billion came after Terra,” the strategists noted. “Our best guess is the VC funding will continue and a long winter similar to 2018/2019 would be averted.”