May 6, 2024
By Anjali Kochhar
In a recent research, financial behemoth JPMorgan (JPM) maintained a pessimistic perspective on cryptocurrency markets, noting a lack of favourable catalysts and the declining power of retail investors. According to the survey, crypto assets have experienced a big sell-off in recent weeks, with ordinary investors capturing a larger share of the profit than institutional investors.
During April, cryptocurrency markets experienced substantial profit-taking, resulting in a 16% decline in Bitcoin—the largest monthly drop since June 2022. Retail investors were particularly active in this sell-off, as evidenced by the fastest-ever outflows from U.S.-based spot Bitcoin exchange-traded funds (ETFs). These ETFs witnessed a cumulative net outflow of $563.7 million, marking the largest since their inception on January 11.
According to JPMorgan’s analysis, many persistent headwinds are adding to the cryptocurrency market’s cautious mindset. Elevated positioning, high Bitcoin prices compared to gold, the expected manufacturing cost of Bitcoin, and low crypto venture capital (VC) funding continue to pose hurdles for the sector.
While institutional investors have been involved in profit-taking, it’s primarily been momentum traders such as commodity trading advisors (CTAs) and other quantitative funds. These traders have been capitalising on previous extreme long positions in both Bitcoin and gold. However, JPMorgan’s analysis of the futures market suggests that other institutional investors, outside of quantitative funds and CTAs, have been more conservative in reducing their positions.
The report underscores the significance of retail investors in driving recent market movements. Their participation in profit-taking activities, coupled with the absence of significant positive catalysts, has contributed to the cautious stance adopted by JPMorgan.
Despite the sell-off, the crypto market continues to face challenges, with uncertainty looming over the emergence of new catalysts that could reignite investor interest. JPMorgan’s cautious view reflects the prevailing sentiment among many institutional players, as they navigate the evolving dynamics of the cryptocurrency landscape.
As the market evolves, investors remain watchful, continuously following developments and altering their strategy to navigate the ever-changing cryptocurrency ecosystem.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
