Photographer: Chris Ratcliffe / Bloomberg
Photographer: Chris Ratcliffe / Bloomberg
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Bitcoin retreated further from the $ 40,000 level on Monday, a drop that may foreshadow further losses based on the latest analysis by JPMorgan Chase & Co. strategists.
The cryptocurrency could be hurt by an exodus of trend-following investors, unless it can “burst” above $ 40,000 soon, said a team that includes Nikolaos Panigirtzoglou. The pattern of demand for Bitcoin futures is $ 22.9 billion Grayscale Bitcoin Trust will help determine the perspective, they added.
“The flow to the Bitcoin Trust in shades of gray would probably need to sustain its pace of $ 100 million a day for the next few days and weeks for such an escape to occur,” the strategists wrote in a note on Friday.
Traders looking for clues to the investor’s appetite for risk were overwhelmed by the impressive recovery of Bitcoin and the turbulent 12% drop from a record of almost $ 42,000 on January 8. the pandemic – as well as the concern that some of these gains may prove unsustainable.
JPMorgan strategists said that Bitcoin was in a similar position in late November, except with $ 20,000 as a test. Flows of institutional investment in the grayscale trust helped the world’s largest cryptocurrency to extend its rally, they wrote.
Trend-following traders “may propagate last week’s correction” and “momentum signals will naturally decline from here until the end of March” if Bitcoin’s price does not exceed $ 40,000, they said.
Bitcoin fell about 4% to $ 35,100 as of 1:14 pm in Tokyo on Monday. Ether, another popular digital currency, dropped 5% to $ 1,200.
Exactly what drove Bitcoin’s price nearly quadrupled over the course of a year remains hazy. Commentators cited day traders, wealthy buyers, hedge funds, companies and even signs of interest from long-term investors, such as insurance companies.
Bitcoin supporters argue that it is maturing as a hedge against the dollar’s weakness and the possibility of faster inflation in a recovering global economy. Others say that its defining characteristic remains speculative booms followed by crashes.
– With the help of Mark Cranfield
(Updates with the most recent price movements since the first paragraph.)