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Cryptocurrency News Articles
JPMorgan Cautions Investors as Crypto Market Faces Downturn
May 02, 2024 at 09:02 pm
Amidst uncertain market conditions, JPMorgan advises caution in cryptocurrency investments. Key factors contributing to this stance include a lack of positive indicators, declining retail investor interest, elevated positioning, and high Bitcoin prices relative to gold and production costs. The firm's analysts note significant selling and profit-taking in the past two weeks, particularly among retail investors. Institutional investors, while also engaging in profit-taking, have been reducing their positions at a slower pace.
JPMorgan Warns of Cautious Stance Amidst Crypto Market Downturn
JPMorgan, a leading global investment bank, has issued a report advising investors to remain vigilant in the cryptocurrency markets due to a combination of unfavorable factors, including a scarcity of positive catalysts, waning retail investor interest, and existing market headwinds.
In a report released on Thursday, JPMorgan analysts led by Nikolaos Panigirtzoglou outlined their rationale for maintaining a cautious stance: "In the absence of positive catalysts, as retail momentum dissipates, and with the three headwinds mentioned previously in our publication (elevated positioning, high bitcoin prices versus gold and versus the estimated bitcoin production cost, subdued crypto venture capital funding) still firmly in place, we maintain a cautious stance on crypto markets over the near term."
The analysts noted a "significant" surge in selling and profit-taking activities in the crypto market over the past fortnight, with retail investors potentially playing a more substantial role than institutional counterparts. "In fact, retail investors appear to have divested from both crypto and equity assets during April," they observed.
Further analysis revealed outflows from spot bitcoin exchange-traded funds (ETFs) and a decline in retail interest indicators for equities, such as net inflows into equity funds, during the preceding month. "The net flow into equity funds turned negative in April following robust inflows in February and March," the analysts remarked.
Regarding institutional investors, the analysts indicated that momentum traders, including commodity trading advisors (CTAs) and quantitative funds, have been liquidating their prior "extreme long" positions in bitcoin and gold. However, they noted that other institutional investors, excluding CTAs and quantitative funds, have been marginally reducing their positions.
Last month, JPMorgan analysts cautioned against a potential drop in bitcoin's price post-halving, attributing this to the event being already factored into its valuation. In February, they projected a decline in bitcoin's price to $42,000 following the halving, citing reduced miner rewards and elevated production costs.
As of the time of writing, bitcoin's price stands around $58,900, according to The Block's price tracker.
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