JPMorgan analysts predict that upcoming crypto price rebounds are likely to be temporary and tactical rather than indicating a lasting upward trend. This article explores their reasoning and market implications.
Points
- Analysts predict crypto rebounds will be temporary and strategic.
- Bitcoin’s current price is high compared to its production cost and volatility-adjusted comparison to gold.
- Future rebounds are expected as liquidations decrease post-July.
JPMorgan analysts have cautioned that any upcoming rebounds in crypto prices are likely to be tactical—temporary and strategic—rather than the start of a sustained upward trend. They note that Bitcoin’s current price of around $67,500 is high when compared to its production cost of about $43,000 and its volatility-adjusted comparison to gold, which stands at approximately $53,000.
Mean Reversion: The analysts highlight that the difference between Bitcoin’s price and its volatility-adjusted comparison to gold suggests a mean reversion around the zero line, constraining any long-term upside potential for Bitcoin prices.
Liquidations and Rebounds: Recent weaknesses in Bitcoin futures have been attributed to liquidations by Gemini and Mt. Gox creditors, as well as the German government selling seized Bitcoins. Analysts predict that these liquidations will likely subside after July, leading to a potential rebound in Bitcoin futures. This aligns with recent increases in gold futures, driven by momentum traders such as commodity trading advisors （CTAs）.
Impact of Trump Presidency: JPMorgan analysts also speculate that a potential second
Donald Trump presidency could benefit Bitcoin and gold. Some investors view Trump as more favorable towards crypto companies and regulations compared to the current Biden administration. Additionally, Trump’s potential trade policies could lead to increased diversification into gold by emerging market central banks, particularly China’s.
Explanation
- Temporary Rebounds: Analysts predict upcoming crypto rebounds to be temporary, driven by strategic moves rather than long-term trends.
- Mean Reversion: The gap between Bitcoin’s current price and its volatility-adjusted comparison to gold suggests limited long-term upside potential.
- Impact of Liquidations: Decreased liquidations post-July are expected to lead to temporary rebounds in Bitcoin futures.
- Trump Presidency: A potential Trump presidency could boost Bitcoin and gold due to favorable policies and increased market diversification.