Bitcoin’s recent price rebound, following a sharp correction earlier this week, has been primarily supported by institutional investors, according to JPMorgan analysts. Despite a significant drop of over 15% on Monday, institutional interest in bitcoin futures remains strong, with minimal de-risking observed.
On Monday, cryptocurrency markets experienced their steepest decline since the FTX crisis, with Bitcoin’s price plummeting more than 15% before staging a recovery. JPMorgan analysts, led by managing director Nikolaos Panigirtzoglou, attributed this rebound to sustained support from institutional investors. Their report, published on Wednesday, highlights that these investors showed limited to no reduction in their bitcoin futures positions, even amid broader market volatility.
JPMorgan’s futures position indicator, which monitors cumulative open interest in CME bitcoin futures, along with a positive futures curve slope, indicates a bullish sentiment among institutional investors. The premium of bitcoin futures prices over spot prices further underscores this confidence, the analysts noted.
Several factors contribute to this optimism, according to JPMorgan. Last week, Morgan Stanley permitted its wealth advisors to recommend spot bitcoin exchange-traded funds (ETFs) to certain clients. Additionally, the major liquidations from Mt. Gox and Genesis bankruptcies are largely behind us, and upcoming cash payments from the FTX bankruptcy are expected to drive demand in the crypto market. Both major U.S. political parties are also signaling support for favorable cryptocurrency regulations, which further supports institutional confidence.
Bitcoin Price Recovery
Following Monday’s correction, Bitcoin’s price has rebounded to over $57,000 from a low of around $49,000. This rebound aligns with JPMorgan’s estimate of the bitcoin production cost, approximately $45,000. A prolonged stay below this level could have pressured bitcoin miners and led to further price declines, the analysts cautioned.
The initial bitcoin drop was attributed more to contagion from corrections in traditional risk assets like equities rather than specific issues within the crypto sector. However, reports suggest that a significant crypto trading firm, possibly Jump Crypto, contributed to the downturn by liquidating substantial amounts of ether.
Market Dynamics
While institutional investors have supported Bitcoin’s recovery, retail investors have been more cautious. Spot bitcoin ETFs have faced their largest monthly outflow since their introduction earlier this year. Additionally, momentum traders and commodity trading advisors have exited long positions and initiated shorts, contributing to the market volatility.
JPMorgan analysts advise a cautious approach, noting that the positive catalysts are largely priced in and the ongoing vulnerabilities in equity markets could pose risks to the crypto sector. Despite the rebound, they suggest maintaining a watchful stance on market developments.
