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JP Morgan feels Bitcoin is trading roughly 2X its intrinsic value


www.chepicap.com 20 May 2019 08:20, UTC
Reading time: ~2 m

Recently Holger Zschaepitz, a German economist, took to twitter with a chart analysis he obtained from JP Morgan. The chart shows the price of Bitcoin against its "intrinsic value," which is calculated based upon cost of production. This analysis shows that as of now, Bitcoin is trading about twice as high as where this valuation would put it.

#Bitcoin prices diverge from intrinsic value, carrying echoes of late 2017, JPM says. pic.twitter.com/DImDoSMv8L

— Holger Zschaepitz (@Schuldensuehner) May 17, 2019

Zschaepitz notes that a significant price divergence to the upside happened at the end of 2017, as the bull run began to take hold of the market. On twitter, some debated if this was in fact a meaningful metric with which to even value Bitcoin:

The notion that cost is equivalent to value baffles me. That’s not what I learned in business school. JPM must be embracing new 🧮 math.

— J. Fong (@jfhksar88) May 17, 2019

“Cost of production” of mining bitcoin is directly related to the market price of bitcoin. I’m not sure this chart is saying much at all.

— Angus Champion de Crespigny (@anguschampion) May 17, 2019

The OP makes a more grievous error: conflating cost of production with intrinsic value...i.e. the Labour Theory of Value 🤢

— Neil Woodfine (@nwoodfine) May 17, 2019

Some also took the opportunity to bash Bitcoin, as is always expected:

I think it is based on a paper that bends over backwards to come up with a way to value an "asset" that by all other well-established metrics comes out as worth very close to zero. #crypto bro culture has zero tolerance for those who tell them about this straightforward truth.

— Ufuk Ince (@UfukInceCFA) May 17, 2019

Of course, others came out in defense:

If something is growing for 10 years but it doesn't make sense to you then it is you who needs to change, not reality.

Eng and Finance bros both get it wrong cause they only understand their respective fields. Bitcoin requires understanding both! https://t.co/BsukdvFuOo

— unconfirmed (@real_dual) May 18, 2019

Ultimately, it won't matter much to most Bitcoin users what JP Morgan thinks of their coins value, and the market will ultimately decide its price. For both, stick right here with Chepicap for any new developments!

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