Despite bitcoin’s recent sharp decline, Wall Street bank JPMorgan is sticking to its volatility-adjusted BTC-versus-gold model target, which points to a theoretical price near $170,000 over the next six to 12 months.
The world’s largest cryptocurrency was trading around $91,200 at the time of publication.
Strategy (MSTR) is a key driver of bitcoin with markets viewing its enterprise value-to-bitcoin holdings (mNAV) ratio, now around 1.13, as a key reading of foreclosure risk if it slips below 1.0, analysts led by Nikolaos Panigirtzoglou wrote in the Wednesday report.
It is encouraging that the company’s mNAV is still above 1.0, the report states.
The analysts pointed to the company’s $1.4 billion reserve fund as a buffer against the need to sell bitcoin, and flagged MSCI’s index decision on Jan. 15 as an asymmetric catalyst: exclusion is largely priced in after the stock’s steep decline since Oct. 10, while a positive result could spark a strong rally.
The company founded by Michael Saylor is the largest corporate owner 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 plummeted from a record high above $120,000 to as low as $82,000.
Among other reasons, the bank linked bitcoin’s recent retreat to renewed pressure on mining in China and a retreat of higher-cost miners elsewhere, some of which have reportedly sold bitcoin as energy costs remain high.
JPMorgan cut its bitcoin production estimate to $90,000 from $94,000 following recent hash rate and mining declines.
The hash rate is the network’s total computing power devoted to mining and validating transactions on a proof-of-work blockchain, and is often used as a proxy for mining competition and difficulty.
A longer stretch below production costs could become self-reinforcing as marginal miners leave, reducing difficulties and pushing the cost estimate lower, as seen in 2018, the analysts said.
The post-Oct. 10 deleveraging in perpetual futures appears mostly behind, the report added.
Read more: JPMorgan warns that the MSCI decision could force the strategy out of the top stock indexes
