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Odaily Translator | Nian Yin Si Tang

Summary:

Summary:

- JPMorgan sees a fair price for bitcoin 28% above current levels, adding that it sees opportunity in the crypto market.

- Cryptocurrencies will fall sharply in 2022 as uncertainty mounts and investors abandon riskier investments.

— but JPMorgan said it generally sees an "upside" in bitcoin and cryptocurrency markets after the sell-off, making the digital asset the preferred alternative investment.

According to JP Morgan, the fair price of Bitcoin is 28% higher than current levels, which means that "there is still a lot of upside" after the sharp sell-off of Bitcoin.

In a note Wednesday, the investment banking giant said cryptocurrencies have overtaken real estate as one of its preferred "alternative assets," which are assets that don't fall into specific categories like stocks and bonds.

The company said it stands by its view that $38,000 is the fair value of bitcoin. This figure is 28% higher than the $29,722 that Bitcoin traded on Wednesday morning (as of press time).

"Last month's crypto market correction is similar to the relative capitulation in January/February last year, and looking ahead, we see an overall uptrend in bitcoin and crypto markets," noted bank strategists including Nikolaos Panigirtzoglu.

Rising inflation and interest rates, Russia-Ukraine conflict and other factors have led to a decline in cryptocurrencies in 2022, forcing investors to abandon what is considered a high-risk asset.

Bitcoin is down about 37% this year, while ethereum is down about 48%. The total market value of cryptocurrencies has shrunk sharply from about $3 trillion in November last year to $1.3 trillion in May this year.

However, JPMorgan said the sell-off hurt cryptocurrencies more than other alternative investments such as private equity, private debt and real estate. In a note, strategists said this suggests that the cryptocurrency has more room to rise.

“As a result, digital assets for hedge funds have replaced real estate as our preferred alternative asset class,” the report reads.

The strategist also said that the UST and Luna crashes have soured sentiment among many cryptocurrency investors. But he believes that so far, there has been little sign that venture capital investment in the cryptocurrency space has stalled as a result of the incident. And as long as venture capital money continues to pour into the cryptocurrency market, a long bear market should be avoided, and the market outlook remains bright.

"So far, there's little evidence that VC money has dried up after Terra's debacle," the report states. "Of the $25 billion in VC funding so far this year, nearly $4 billion came from Terra. Our best guess is that VC money will continue (influx into the crypto market), which will avoid a long bear market similar to that seen in 2018/2019." However, once this part of the funds is dried up, the crypto market is likely to usher in another long bear market.

The report also said Terra's collapse had limited knock-on effects on the rest of the DeFi ecosystem (although calling it a "major blow to the crypto world"). According to the bank, the TVLs of other DeFi projects appear to be “relatively resilient” to Terra’s demise.

While the Terra debacle did affect investor sentiment, it did not affect other stablecoins. The report lays out the differences between the different types of stablecoins, explaining that each design has a different risk profile. It noted that algorithmic stablecoin Frax has come under moderate pressure, while Neutrino USD has lost its peg to the greenback.