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After a yearlong bear market, Bitcoin is finally showing signs of recovering to its former glory. While most of the crypto community is celebrating the re-rise of Bitcoin, JPMorgan wants people not to get too optimistic. The banking giant’s representatives wrote a note this Friday, claiming that the improvement in the market is just the first step towards another eventual slump similar to the one in 2017.
Bitcoin has been on a recovery run over the last few weeks. It was only a month ago that Bitcoin had traded below $4,000. However, within the next month, Bitcoin hit its 2019 high of $8,350. The hike in Bitcoin’s price has the community hopeful that the bear market is finally at its end and Bitcoin will regain the value it lost back in 2018.
JPMorgan has a digital currency of its own called JPM Coin, which just happens to be a competitor of Bitcoin. The note written to investors by strategists from JPMorgan states that Bitcoin surpassed its intrinsic value with the current surge in price. The analysts believe that this rise in value is hence similar to the one in 2017 and is likely to be followed by another devastating slump. The note states:
“Over the past few days, the actual price has moved sharply over marginal cost. This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”
Through this criticism of Bitcoin’s recent gains, JPMorgan has earned some criticism of their own by the crypto community. Some even going as far as to accuse JPMorgan of fear mongering against a competitor cryptocurrency (although pegging JPM Coin as a cryptocurrency is problematic).
While there are similarities in the current price rise and the one in 2017, there are also some distinguishing factors. Back in 2017, ICOs were still a huge source of cash inflow and investors bought in Bitcoin and Ethereum to be able to invest in new projects. Today, the ICO market has shrunk to a tiny size, contributing next to nothing to the current rise in Bitcoin’s price. In Q1 2019, ICOs raised around $118 million. In a similar period in 2018, this amount was up by a magnitude of 58 to a whopping $6.9 billion.
Another distinguishing factor is the involvement of some of the biggest names in the industry. Companies like Facebook, Amazon, Microsoft, Walmart, Unilever, IBM, HTC, Samsung and many more have heavily invested in blockchain-powered solutions and cryptocurrencies. This involvement supports a much more stable gain in the prices for Bitcoin and other cryptocurrencies.