JP Morgan strategists have noted that the recent Bitcoin rally coincides with the 2017 rally which saw Bitcoin reach an all-time high of $20,000.

Nikolaos Panigirtzoglou, one of the strategists, said that the leading crypto has “surged beyond its intrinsic value, mirroring a similar move in 2017.” Unfortunately, as per Panigirtzoglou and the group, this is a bad omen since the rally will be followed by a fall.

Bitcoin was treated as a commodity

To come to this conclusion, the strategists considered factors such as the efficiency of the hardware used to mine Bitcoin, cost of electricity, and computational power. All these factors assisted in determining the cost of production while treating Bitcoin as a commodity.

Panigirtzoglou and the group noted that the recent sharp rise in the price of Bitcoin shows that BTC’s 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.”

While the market price for Bitcoin was around $20,000 towards the end of 2017, its intrinsic value by then was roughly $5,000. Additionally, the price of Bitcoin was oscillating around its intrinsic value for the better part of 2018 and early 2019. This has already changed, and Bitcoin is now above its intrinsic value.

It’s hard to define the intrinsic value

However, the JP Morgan strategists agree that defining the fair value of Bitcoin or any other cryptocurrency is a challenging task. Therefore, it is bound to result in a wide difference from one analyst to the other. For instance, some analysts may see a high or low intrinsic value, while others may not see it at all.

Bitcoin is currently trading at slightly above $8,000 which accounts for approximately a 150 percent increase compared to its lowest in 2018 when it was exchanging hands at slightly above the $3,000 mark.