In a recent report, analysts led by JPMorgan Managing Director Nikolaos Panigirtzoglou expressed skepticism about the sustainability of any recovery in cryptocurrency prices.
They suggested that such a recovery may be tactical, temporary and strategic rather than the beginning of a permanent uptrend.
JPMorgan Analysts: “Recovery in Bitcoin Price May Start as of August”
Analysts noted that Bitcoin's current price of around $67,500 is high compared to its production cost of about $43,000 and its volatility-adjusted benchmark for gold, which is about $53,000.
The report noted that the difference between Bitcoin's price and JPMorgan's volatility-adjusted gold benchmark “indicates mean reversion around the zero line, thus limiting any upside potential for Bitcoin prices in the long term.”
The report also emphasized that a recovery in the BTC price is expected starting from August as liquidations decrease after July. Bitcoin futures, Gemini and Mt. Gox has been weak lately due to creditors' liquidations as well as the German government selling seized Bitcoins. These liquidations are expected to decrease after July, leading to a recovery in Bitcoin futures starting in August. This is also consistent with the recent increases in gold futures.
“Momentum traders, such as commodity trading advisors, have played a big role in gold futures trading,” the analysts said, adding: “The momentum signal for gold has moved higher in July toward the overbought territory it was in last April.”
Interestingly, the report also suggested that Bitcoin and gold could benefit from Donald Trump's possible second presidency. Some investors think Trump is more favorable to cryptocurrency companies and their regulations than the current Biden administration. Analysts added that Trump's potential trade policies could lead to an increase in the gold orientation of emerging market central banks, especially the Chinese central bank. This could have significant implications for both Bitcoin and gold markets in the future.
*This is not investment advice.