While BTC Trades Below $70,000, a JPM Analyst Says Bitcoin's Looking Attractive Versus Gold

Bitcoin dropped and then traded below $70,000 this week, and with it, talks about this potentially being the next Bitcoin bear market have begun. The latest correction to the Bitcoin mining difficulty adjustment and net outflows from Bitcoin ETFs would suggest that might be the case. Despite all of this, one JPMorgan analyst sees significant upside for Bitcoin (especially relative to gold). 

TL;DR

• A JPMorgan quant says Bitcoin is in an attractive investment position compared with gold.  

• Miners saw the sharpest drop in the difficulty adjustment since 2021, with some even selling Bitcoin.  

JPMorgan Quantitative Strategist Says Bitcoin Is Now in an Interesting Position to Invest Alongside Gold 👀

Bitcoin dipped below $70,000 this week, and market sentiment appears to be at the extreme fear level, according to CoinMarketCap. 

While Bitcoin’s price performance hasn’t exactly been fun to watch for HODLers, the current price levels pose a potential opportunity to buy Bitcoin, at least according to a JPMorgan quant.

A report by quantitative analyst Nikolaos Panigirtzoglou from JPMorgan has caught the attention of various financial media outlets. 

In his report, he states that "large outperformance of gold vs. bitcoin since last October, coupled with the sharp rise in gold volatility, has left bitcoin looking even more attractive compared to gold over the long term."

He reportedly noted that recent challenges in crypto markets include a widespread decline in risky assets and a slump in gold and silver, which are commonly considered alternative hedges.

Combine that with recent net outflows from Bitcoin ETFs, and it suggests that negative sentiment is widespread among both institutional and retail investors. 

The price decline has driven Bitcoin's value significantly below its approximate production cost of $87,000. Historically, this cost level has acted as a "soft price floor," according to Panigirtzoglou.

Now to the good part: the central point of his report is that Bitcoin's long-term risk-adjusted potential relative to gold has improved.

The Bitcoin-to-gold volatility ratio has fallen to 1.5, which marks a record low. 

To achieve parity with private-sector gold investments on a volatility-adjusted basis, Bitcoin's market capitalization would need to increase substantially. 

Panigirtzoglou's analysis suggests that Bitcoin's price would need to approach $266,000 to match gold's current performance. 

He views this as representing significant upside potential in the long run, once negative sentiment has diminished, though he believes that these goals aren’t achievable in the near term.

Having said that, this, of course, is just a price prediction and omits many intermediate scenarios in which different market reactions could affect the price. So do your own research and come to your own conclusions before you hit that buy button.

Bitcoin Miners See a Sharp Drop in the Difficulty Adjustment since 2021, With Some Even Selling BTC 📉

It's been a while since I last wrote about the Bitcoin mining industry, and today's news is a great chance to share some insights again. 

Whenever the price of Bitcoin drops, there’s often significant concern about Bitcoin miners. After all, they're the ones keeping the blockchain running and making sure that new BTC are distributed. 

This week, we saw the largest correction in the mining difficulty adjustment since the China ban back in 2021. 

As shown in the image above, the drop was over 11%, from roughly 141.42 trillion to 125.86 trillion. Historically, this was the tenth-largest drop in Bitcoin's 17-year history. 

Why does this matter? 

The difficulty adjustment measures how hard it is to solve the mathematical puzzle of the mining algorithm. 

The Bitcoin protocol adjusts it regularly to maintain a consistent rate of new block creation, ensuring a steady, predictable issuance of new coins every ten minutes. 

Therefore, it's an important mechanism to keep the entire Bitcoin mining network and blockchain in check. 

Combine the price and difficulty adjustment plunge, and you will see that many miners aren’t in the green right now. 

Currently, the average production cost of one Bitcoin is roughly $87,000. That means that even if a miner finds a block, on average, they lose about 20% per BTC. 

This triggers a chain reaction we have seen before. Either miners are raising capital or selling BTC to cover their costs. 

And this week, we saw the first miner in Cango Inc., which sold 4,451 BTC, and even went a step further, pivoting to AI data centers.

This is a move we have seen by other Bitcoin miners as well. They can leverage their infrastructure to scale AI models, generating additional revenue alongside their Bitcoin operations. 

Time will tell whether we see more miners pivot or sell their BTC if the dollar price of Bitcoin remains below the production cost of BTC.  

Elsewhere in Bitcoin 📖

A quick look at what else has been happening in Bitcoin: 

• Tether makes a $10 billion profit in 2025

• Someone sent 2.565 BTC to Satoshi’s wallet

• Jim Cramer says Bitcoin is done as a store of value

• The CME Group looks into digital dollars and stablecoin instruments

• China cracks down on crypto by restricting stablecoins and real-world assets

Your fellow stacker in sats, 

Patrick Lowry

PS: Connect with me up on X if you want to hear more of my thoughts on Bitcoin and digital assets.

Disclaimer: The opinions expressed in this newsletter are solely those of the author and do not necessarily represent the views of any associated company. This newsletter is for educational and informational purposes only and should not be construed as investment, financial, or any other professional advice. Investing in cryptocurrencies is highly speculative and carries a significant risk of substantial financial loss, so you must conduct your own thorough research and consult with independent professional advisors before making any decisions.