JPMorgan Analysts Express Doubt
In a report published on Wednesday, JPMorgan analysts expressed skepticism about the sustainability of the latest bitcoin rally. They stated that the sharp gains appear to be “overdone” when compared to the cryptocurrency’s underlying fundamentals. The analysts, led by Nikolaos Panigirtzoglou, identified two primary catalysts that contributed to bitcoin’s 30% price surge over the past month. These catalysts were the potential approval of a spot bitcoin ETF in the US and legal victories for cryptocurrencies against the SEC.
The analysts, however, remain unconvinced that these factors alone justify the scale of the Bitcoin rally. They are skeptical of both the potential approval of a spot bitcoin ETF and the legal victories against the SEC. According to the report, they believe that rather than fresh capital entering the crypto markets, existing capital in bitcoin products is simply shifting into newly approved spot bitcoin ETFs. They specifically pointed out the spot bitcoin ETFs in Canada and Europe, which have seen limited inflows since their launch, indicating limited potential for large inflows into US spot bitcoin ETFs.
“Instead of fresh capital entering crypto markets, we see existing capital in bitcoin products shifting into newly approved spot bitcoin ETFs,” they wrote.
The analysts also raised doubts about whether recent legal defeats would lead to the SEC relaxing its regulatory stance on cryptocurrencies. They stated that the pending US crypto industry regulations and the memories of the FTX fraud case are likely to prevent significant shifts in the stance of US lawmakers.
“U.S. crypto industry regulations are still pending and we do not believe U.S. lawmakers would shift their stance because of the legal cases, especially with the memories from the FTX fraud still fresh,” they stated.
Predictable Impact of Bitcoin’s Halving Event
Another potential catalyst mentioned by JPMorgan is Bitcoin’s upcoming “halving” event in 2024, which will reduce the supply of new bitcoins. However, the analysts believe that this event is already priced in and its impact is well factored into the current bitcoin price. They consider the argument that the halving event will provide a significant boost to be unconvincing.
In summary, JPMorgan analysts perceive significant risks to the sustainability of the recent Bitcoin rally due to unstable fundamentals. They caution that there is a chance of a “buy rumor, sell fact” decline in the event of any spot bitcoin ETF approval. While Bitcoin has experienced significant growth this year, with a 110% increase year-to-date, it is still trading at a 48% markdown from its all-time high reached in November 2021. The crypto market has proven to be susceptible to sharp sell-offs in the past, as demonstrated by the collapse of FTX, which wiped out over $200 billion in crypto market value.
Although some investors are optimistic about Bitcoin’s halving event and the potential approval of a US spot Bitcoin ETF as catalysts for further growth, JPMorgan remains cautious and opts to stay on the sidelines of the crypto boom.
