Despite Bitcoin's sharp rebound on Friday and its return above the $60,000 mark, JPMorgan believes that the catalysts that could drive prices higher for Bitcoin and the broader cryptocurrency market are actually mostly priced in.
The digital asset price experienced its biggest sell-off since the 2022 FTX crash earlier this week, driven largely by the spread of traditional markets, with Bitcoin falling more than 15% before rebounding, the bank's analysts wrote. The cryptocurrency sell-off was mainly driven by retail investors, while momentum traders also exacerbated the sell-off by exiting long positions and establishing short positions, the bank said.
The market corrected sharply after the Bank of Japan raised its benchmark interest rate last week, which led to a stronger yen and a reversal of the “carry trade.” While traditional and digital asset markets have since stabilized, many traders remain concerned.
Meanwhile, there is limited or no de-risking by institutional investors in the bitcoin futures market, analysts said.
The JPMorgan team noted that there are a number of factors that could keep institutional investors optimistic about Bitcoin and the crypto industry, including Morgan Stanley Wealth Advisors offering cryptocurrencies to their clients, the upcoming end of Mt. Gox's bankruptcy repayment, and both parties in the United States pointing to favorable regulatory provisions.
However, the bank said that these positive catalysts appear to have been factored into current digital asset prices. “With limited de-risking in the CME Bitcoin futures market and U.S. equities still looking vulnerable… despite the recent pullback, we remain cautious on the crypto market.”
Cautious comments from JPMorgan are nothing new, with the bank recently saying any near-term rally in crypto markets could be short-lived as Bitcoin’s price remains too high relative to its production costs and relative to gold.
Analysts at the bank currently estimate that the average production cost for Bitcoin miners is around $49,000 per coin, and any price action below this level will put pressure on miners, further depressing Bitcoin prices.
The amount of Bitcoin miners are holding in reserve has fallen to its lowest point in three years as April’s “halving” slashed their revenue.
According to a report by crypto research firm Kaiko, as of August 3, the total amount of bitcoins held by miners has fallen to about 1,510,300, down about 2.4% from its peak in December 2020. At recent prices, these bitcoins are worth about $86 billion, or about 8% of all bitcoins in circulation.
Data shows that miners have been selling tokens since the price of Bitcoin began to rise in late 2023, well ahead of the "halving" in April.
Article forwarded from: Jinshi Data
