Institutional demand drops and raises red flags for Bitcoin and Ethereum
- Weakened institutional demand.
- Bitcoin and Ethereum futures in decline.
- Short-term downside risk.
The cryptocurrency market, known for its volatility and boom-bust cycles, has just received a red alert from financial giant JPMorgan. Analysts at the institution have raised the alarm, pointing to a weakening in institutional demand for cryptocurrency futures. Bitcoin and Ether on the Chicago Mercantile Exchange (CME) as a harbinger of possible turbulence in the near term, according to as information shared by The Block.
The recent decline in the total cryptocurrency market cap, which saw a significant correction after reaching an all-time high in December, appears to be closely linked to this decline in institutional demand. The proximity of Bitcoin and Ether futures to “backwardation” – a scenario where futures prices fall below spot prices – echoes the events of last June and July, a period marked by uncertainty and market volatility.
According to the publication, JPMorgan analysts highlighted that this change in dynamics is a clear indication of a decrease in interest from institutional investors, who often use CME futures contracts as a form of regulated exposure to cryptocurrencies. The absence of “contango” – a premium in futures prices relative to spot prices, driven by the high “risk-free” rate in cryptocurrency markets – suggests a change in market sentiment.
JPMorgan’s analysis points to two main factors contributing to this weakening demand. First, the lack of immediate positive catalysts, such as major regulatory initiatives in the United States, is prompting some institutional investors to take profits and adopt a “wait and see” stance. Second, the reduction in exposure by momentum-oriented investment funds, such as commodity trading advisors, is putting additional pressure on demand.
Given this scenario, JPMorgan analysts warn of the possibility of continued pressure on cryptocurrency markets in the short term. The waning signs of momentum in Bitcoin and Ether, with the latter already entering negative territory, reinforce this cautious outlook.
At the time of publication, Bitcoin's price was trading at $97.232,91, up 1% in the last 24 hours. Ethereum, on the other hand, is trading at $2.740,79, up 0.5%.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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