JPMorgan Chase, in its latest report, pointed out that the Bitcoin market is facing multiple headwinds, including declining interest from retail investors and weak venture capital funding for cryptocurrencies. In the absence of clear catalysts, JPMorgan analysts suggest that investors should remain cautious in the cryptocurrency market.
Summary:
JPMorgan Chase CEO: Stagnant inflation in the 1970s may reoccur due to the weak US economy and high inflation. There is a 50% chance of a soft landing.
Background:
BTC funding rate turns negative, and concerns arise over miners selling off. JPMorgan Chase, known for its bearish view on Bitcoin, has spoken again.
Table of Contents:
JPMorgan Chase continues to maintain a “cautious” stance on the cryptocurrency market.
Retail investors are the main force behind the recent decline in the crypto market.
JPMorgan Chase’s recent predictions for BTC.
After the Federal Reserve announced for the sixth time on the 2nd that it would keep interest rates unchanged, Bitcoin rebounded from around $57,000 and briefly reached $59,931 earlier today, striving to regain the $60,000 level.
Although the selling pressure on Bitcoin seems to have come to an end, JPMorgan analysts led by Nikolaos Panigirtzoglou, in a research report released on Thursday, recommended caution in the cryptocurrency market in the near term due to various reasons such as the lack of positive factors and declining interest from retail investors:
Although Bitcoin has rebounded today, looking back at April, it fell by 15%, marking the largest monthly decline since June 2022. JPMorgan analysts stated that retail investors may have played a larger role than institutional investors in the “significant” selling or profit-taking in the cryptocurrency market.
The analysts added that not only did Bitcoin spot ETF experience net outflows in April, but the interest indicators of retail investors in the product, such as net inflows, also declined over the past month.
Regarding institutional investors, the analysts stated that some institutional investors, including commodity trading advisors (CTAs) and quantitative funds, have cashed in on their “extremely 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, which may indicate their intention to hold for a longer term.
In mid-April, JPMorgan Chase issued a warning that only $3.2 billion in venture capital funding has flowed into the cryptocurrency industry so far this year, which is relatively flat compared to previous years and poses a potential downside risk to the market. However, JPMorgan Chase also added that venture capital funding seems 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. 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 in order to balance the risk of the entire portfolio. The analysts further pointed out that based on adjusting for Bitcoin’s volatility, assuming Bitcoin is equivalent to gold in portfolio allocation, the total market value of Bitcoin would be reduced to $90 billion (i.e., the current market value of $3.3 trillion divided by 3.7), and the price of Bitcoin should be $45,000, significantly lower than the current price level of around $60,000.
Before the Bitcoin halving, JPMorgan Chase warned in March that based on futures position indicators and the premium of Bitcoin futures over spot prices, Bitcoin is still in an overbought state. So far, only a few positions have been closed, 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 may fall to around $42,000.
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