Bitcoin is ahead of itself with its recent rally - JPMorgan Chase strategists

Bitcoin's Monday rally has stalled as the first digital coin retraced from the intraday high of $8,304 to trade marginally below $7,900 by the time of writing. While BTC is still in the green zone on a day-on-day basis, the intraday losses are nearing 4%, which reinforces the idea of further downside correction towards the local support at $7,800. 

Meanwhile, analysts from JPMorgan Chase & Co. including Nikolaos Panigirtzoglou believe that the recent rally took Bitcoin well above its intrinsic value calculated on the basis of such parameters as computational power, electricity expense, and hardware energy efficiency.

“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,”  the experts wrote in a note to clients on Friday. 

The experts draw parallels with 2017 boom when the cryptocurrency hit the historically high level above $19,000. A year-long bearish trend took the price of the digital asset to $3,100 by December 2018. After a period of rangebound trading, the coin returned to life in April, after the price broke above $5,000. Bitcoin managed to gain over 110% since the start of the year, though it is still nearly 60% lower from the peak.

“Defining an intrinsic or fair value for any cryptocurrency is clearly challenging. Indeed, views range from some researchers arguing that it has no fundamental value, to others estimating fair values well in excess of current prices,” the J.P. Morgan strategists added.