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Bitcoin rose to $ 37,000 on Monday, returning to a level that JPMorgan Chase & Co. strategists see as a tipping point for digital currency.
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 investors’ appetite for risk were overwhelmed by Bitcoin’s impressive recovery and a turbulent 12% drop from a record $ 42,000 on January 8. The cryptocurrency boom since March reflected the boiling of stimulus-flooded financial markets – as well as concerns about whether earnings will turn out to be passengers.
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 rose about 1.6% to $ 37,138 as of 12:29 pm in London on Monday. Ether, another popular digital currency, fell 1.6% to $ 1,241.
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.
‘Dread to Think’
Some, like Chris Iggo, remain skeptical about Bitcoin’s appeal to large institutions.
“I am afraid to think what most venture capitalists would think about this being in a core investment portfolio,” wrote the chief investment officer at Axa Investment Managers in a note. “For assets to be considered in a long-term investment portfolio, one must be able to assign some fundamental intrinsic value to them.”
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.
Read More: Bitcoin Boom means ‘Best Gold’ or Bigger Bubble? QuickTake
– With the help of Mark Cranfield