Bitcoin Attractively Valued as Volatility Falls: JP Morgan

Bitcoin and ETFs such as the Coinshares Valkyrie Bitcoin Fund (BRRR) are coming off rough showings in August. This isn’t surprising given the cryptocurrency’s reputation for faltering in the eighth month of the year.

August woes may be just the buying opportunity bitcoin and BRRR investors have been waiting on. A rebound may or may not materialize. Yet some experts believe that’s the exact scenario in store over the near term. Recent research from JP Morgan suggests the digital currency’s August struggles took the largest cryptocurrency below its fair value.

Analyst Nikolaos Panigirtzoglou pointed out that bitcoin’s recent decline indicates the digital currency’s risk-adjusted gap with gold, an asset to which it’s often compared, is closing.

Why BRRR Could Rise

Market participants considering the currency or BRRR can find other encouraging tidbits in JPMorgan’s recent update. For example, Panigirtzoglou believes the dominant digital currency can ascend to $126,000 by the end of this year. That’s an all-time high. And that implies significant upside from the $108,420 handle the cryptocurrency sported as of late last Friday.

Perhaps adding to the case for the currency is that its volatility is sinking to noticeably low levels. Volatility has long been viewed as a headwind to broader adoption in the investment community

“The Bitcoin price looks too low compared to gold as Bitcoin volatility reaches historically low levels,” observed Panigirtzoglou. “One of the striking developments this year has been the collapse in Bitcoin [volatility]from close to 60% at the beginning of the year to a historically low level of 30% currently.”

Contributors to Bitcoin’s Waning Volatility

There’s some belief that increased institutional adoption of the currency and buying among ETFs like BRRR are factors contributing to the digital currency’s waning volatility. Panigirtzoglou said corporate Treasury adoption is helping reduce turbulence for the currency, too.

“We believe a factor behind the collapse in Bitcoin volatility has been the acceleration of Bitcoin purchases by corporate treasuries,” added the analyst.

It’s been widely documented this year that more companies are embracing bitcoin and ethereum in their corporate Treasuries. It’s also been reported that buying activity has acted as a spark for both digital assets. If bitcoin’s volatility traits more closely resemble those of gold, corporate Treasury buying could surge. That would likely lift BRRR in the process.

“It is thus realistic to expect that the allocations  to bitcoin by institutional investors could match those of competing asset classes such as gold if there is convergence in volatilities,” concluded the JP Morgan analyst.

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