JPMorgan Chase warns of multiple headwinds facing the Bitcoin market in its latest report, including a decline in retail investor interest and weak investment funds for cryptocurrency risks. Without clear catalysts, JPMorgan analysts suggest that investors should remain cautious about the cryptocurrency market.
Summary:
JPMorgan Chase continues to maintain a “cautious” stance on the cryptocurrency market.
Retail investors are the main drivers behind the recent decline in the cryptocurrency market.
JPMorgan Chase’s recent predictions for BTC.
After the US Federal Reserve’s sixth announcement of maintaining interest rates on the 2nd, Bitcoin rebounded from around $57,000, touching $59,931 earlier today, aiming to regain the $60,000 level.
Although the selling pressure on Bitcoin seems to have come to an end, JPMorgan Chase analyst Nikolaos Panigirtzoglou, in a research report published on Thursday, advises caution in the cryptocurrency market due to a lack of positive factors and a decline in retail investor interest, among other reasons.
Despite Bitcoin’s rebound today, looking back to April, Bitcoin fell by 15%, marking the largest monthly decline since June 2022. JPMorgan Chase analysts state that there has been a “significant” sell-off or profit-taking phenomenon in the cryptocurrency market, and retail investors may have played a larger role than institutional investors.
The analysts also added that not only did Bitcoin spot ETF experience net outflows in April, but indicators of retail interest in the product, such as net inflows, have also declined in the past month.
Regarding institutional investors, the analysts stated that some institutional investors, including Commodity Trading Advisors (CTAs) and quantitative funds, have taken profits from “extreme long” trades in Bitcoin and gold. However, the analysts concluded that other institutional investors, apart from these CTAs and quantitative funds, have reduced their positions to a lesser extent, perhaps indicating their intention to hold for the long term.
In mid-April, JPMorgan Chase warned that only $3.2 billion in venture capital funds had flowed into the cryptocurrency industry so far this year, which is relatively flat compared to previous years, posing a potential downside risk to the market. However, JPMorgan Chase also added that venture capital funds seem to be slowly recovering, and compared to that, cryptocurrency hedge funds have been more active this year, with their managed assets increasing significantly in the past six months, estimated at around $20 billion.
In early March, JPMorgan Chase pointed out that volatility should be considered in portfolio allocation, and if Bitcoin is seen as a similar asset to gold, then due to Bitcoin’s volatility being about 3.7 times that of gold, a smaller proportion should be allocated to Bitcoin to balance the risk of the entire portfolio. The analysts further stated that based on adjusting for Bitcoin’s volatility, assuming Bitcoin is equivalent to gold in portfolio allocation, the total market cap of Bitcoin would shrink to $90 billion (i.e., the current market cap of $3.3 trillion divided by 3.7), resulting in a Bitcoin price of $45,000, much lower than the current level of around $60,000.
Even before the Bitcoin halving, JPMorgan Chase warned in March that based on the futures position indicator and the premium of Bitcoin futures over spot prices, Bitcoin was still in an overbought state, with only a few positions being closed so far, indicating a high level of open interest in the market.
Previously, JPMorgan Chase analysts predicted that after the halving, due to reduced mining rewards and increased production costs, Bitcoin could drop to around $42,000.
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