Cryptocurrency enthusiasts relying on Bitcoin to recover above the $ 40,000 level face a challenge due to faltering demand for the largest digital asset tracking fund, according to JPMorgan Chase & Co.
The pace of flows to the $ 20 billion The grayscale Bitcoin Trust “appears to have peaked” based on four-week averages, JPMorgan strategists led by Nikolaos Panigirtzoglou said in a note on Friday. The fund has dropped 22% in the past two weeks through January 22, overcoming a 17% drop in Bitcoin in the same period.
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“At the moment, the momentum of institutional flow behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to exceed $ 40,000,” said the strategists. They added that “the risk is that momentum investors will continue to undo Bitcoin’s future positions”.
Bitcoin’s sharp rise lost momentum after the biggest cryptocurrency peaked at nearly $ 42,000 on January 8. Proponents argue that institutional interest helped boost Bitcoin’s use as a hedge against dollar weakness and inflation, while skeptics say the latest increase is more like bubble speculation, similar to the 2017 craze that preceded a rapid collapse. .
“The balance of short-term risks is still tilted to the negative side,” said JPMorgan strategists.
In a separate analysis, Adam James with OKEx Insights found at least a few long-term Bitcoin holders – the so-called “whales” – and the miners probably sold to institutional investors during the 2020 rally, as the average age of the currencies traded increased in the beginning in October and has remained high ever since.
“Old guard Bitcoiners have sold some of their old bags to new institutional buyers with extremely large new bags to fill,” wrote James. OKEx Insights is affiliated with the crypto exchange OKEx.
Bitcoin advanced about 2% to $ 32,700 as of 11:43 am in Tokyo on Monday. The digital currency still registers a gain of about 260% compared to last year, despite having spilled around US $ 10,000 with this month’s historical record.