Bitcoin's Market Price Is Above Its Intrinsic Value, Says JPMorgan

  • Bitcoin's Market Price Is Above Its Intrinsic Value, Says JPMorgan

Bitcoin's Market Price Is Above Its Intrinsic Value, Says JPMorgan

There is a growing institutional interest in Bitcoin-related contracts.

JP Morgan Chase bank, the largest bank in the USA with total assets of US$2.765 trillion, has stated that it anticipates good response to CME Group's Bitcoin (BTC) options trading when it is launched for clients on January 13.

While a consortium known as Bakkt, which includes New York Stock Exchange parent Intercontinental Exchange Inc., began offering options last month, volumes and open interest have been "rather small", strategists led by Nikolaos Panigirtzoglou wrote in a note January 10. Notably, the BTC contracts' volume is still far from all-time highs, but the growth in open interest is a positive sign.

According to the report, CME is dominating in trading Bitcoin Futures on regulated exchanges, which could serve as the game-changer in the long run.

Panigirtzoglou also went on to write that there has been an increase in the activity for the underlying CME futures contract over the past few days and that the open interest has increased 69% since the end of 2019, and also that the number of large open-interest holders has grown. This is an indication of the increase in activities.

As reported by Bloomberg, a note written by strategists at JPMorgan Chase & Co indicated "high anticipation" to the introduction of bitcoin options by market participants.

Bitcoin (BTC) futures options from CME Group saw volumes in excess of $2.3 million on the product's first day of public trading, the company has confirmed. There is an instance to the above point. Now, it's to be seen how will the price react next week.

But although Bitcoin's intrinsic value has been rising, it is still below the market price.

"The market price has declined by almost 40 per cent from its peak while the intrinsic value has risen by around 10 per cent", Panigirtzoglou wrote.

JP Morgan calculated the inherent value of Bitcoin by valuing it as a commodity and looking at the marginal cost of production, including the computational mining power that it takes and the electrical energy it consumes.