Despite the recent sharp declines in the price of bitcoin, Wall Street bank JPMorgan remains firm on its volatility adjusted model (VAM) target for bitcoin against gold, which points to a theoretical price near $170,000 in the next six to twelve months.
The world’s largest cryptocurrency was trading around $91,200 at the time of publication.
The model-adjusted strategy (MSTR) is a key driver for bitcoin, and markets are watching its bitcoin enterprise value-to-share (mNAV) ratio, currently around 1.13, as a key indicator of the risk of a forced sell if it falls below 1.0, analysts led by Nikolaos Panigirtzoglou wrote in a report on Wednesday.
Encouragingly, the firm’s mNAV is still holding above 1.0, the report said.
Analysts pointed to the firm’s $1.4 billion reserve fund as a buffer against the need to sell bitcoin, and pointed to MSCI’s Jan. 15 index decision as an asymmetric catalyst: The delisting was largely accounted for after the stock’s sharp decline since Oct. 10, while a positive outcome could spur strong growth.
The firm, founded by Michael Saylor, is the largest corporate holder of bitcoin, with 650,000 BTC on the balance sheet. The firm has come under fire in recent weeks after the price of the leading cryptocurrency fell from a record high of over $120,000 to just $82,000.
Among other things, the bank attributed bitcoin’s recent decline to renewed pressure on mining in China and the withdrawal of more expensive miners in other countries, some of whom reportedly sold bitcoin as energy costs remain high, SEEbiz reports.
JPMorgan lowered its estimate of the cost of producing Bitcoin from $94,000 to $90,000 after a recent drop in hash rate and mining difficulty.
Hash rate is the total computing power of a network dedicated to mining and validating transactions in a proof-of-work blockchain, and is often used as a proxy for competition and mining difficulty.
A prolonged period below production costs can become self-reinforcing as marginal miners pull back, reducing weight and lowering cost estimates, as seen in 2018, analysts said.
The post-October 10 deleveraging in perpetual futures contracts appears to be largely complete, the report added.
