Despite the recent sharp decline in Bitcoin’s price, Wall Street bank JPMorgan is sticking to its volatility-adjusted BTC vs. gold model target, which indicates a theoretical price near $170,000 over the next six to 12 months.
The world’s largest cryptocurrency was trading around $91,200 at press time.
Strategy (MSTR) is a key driver of Bitcoin with markets monitoring its enterprise value-to-bitcoin holdings (mNAV) ratio, now around 1.13, as a key readout for the risk of forced selling if it falls below 1.0, analysts led by Nikolaos Panigirtzoglou wrote in Wednesday’s report.
Encouragingly, the company’s mNAV is still holding above 1.0, according to the report.
Analysts pointed to the company’s $1.4 billion reserve fund as a buffer against the need to sell bitcoin, and pointed to the Jan. 15 MSCI index move as an asymmetric catalyst: the exclusion is largely priced in after the stock’s sharp fall since Oct. 10, while a positive result could fuel a strong rebound.
The company founded by Michael Saylor is the largest holding company of bitcoin, with 650,000 BTC on its balance sheet. The company has come under fire in recent weeks after the price of the leading cryptocurrency fell from an all-time high of more than $120,000 to a low of $82,000.
Among other reasons, the bank linked bitcoin’s recent decline to renewed pressure on mining in China and the withdrawal of higher-cost miners elsewhere, some of whom have reportedly sold bitcoin while energy costs remain high.
JPMorgan reduced its estimate for the cost of producing Bitcoin from $94,000 to $90,000 after recent declines in the hashrate and mining difficulties.
Hashrate is the total network computing power devoted to mining and validating transactions on a proof-of-work blockchain, and it is often used as an indicator of competition and mining difficulty.
A prolonged period below production costs can be self-reinforcing as marginal miners exit, reducing hardship and lowering the cost estimate, as seen in 2018, analysts said.
After October. Deleveraging of perpetual futures appears largely overdue, the report adds.
Learn more: JPMorgan warns MSCI move could force strategy out of major stock indexes
