J.P. Morgan: Recent Cryptocurrency Decline Driven by Retail Investors, Three Major “Unfavorable” Factors in the Current Market

J.P. Morgan: Recent Cryptocurrency Decline Driven by Retail Investors, Three Major "Unfavorable" Factors in the Current Market

J.P. Morgan: Recent Cryptocurrency Decline Driven by Retail Investors, Three Major "Unfavorable" Factors in the Current Market

Wall Street giant JPMorgan (JPM) pointed out in its recent report that the recent decline in the cryptocurrency market has been primarily driven by retail investors, as the current market lacks positive catalysts.

The analyst team led by Nikolaos Panigirtzoglou stated in the report that retail investors sold both cryptocurrencies and stocks in April, and the trend of capital outflows also appeared in Bitcoin spot ETFs. According to Sosovalue data, Bitcoin ETF outflows have become more frequent, with even the previously never-recorded outflows from the BlackRock Bitcoin ETF reaching approximately $37 million yesterday, resulting in the highest-ever outflows in Bitcoin spot ETFs (563.7 million USD).

In the current market environment, JPMorgan identified three major unfavorable factors, namely high positions, Bitcoin’s relative position to gold and production costs, as well as the depressed venture capital (VC) market for cryptocurrencies.

The report pointed out that significant profit-taking has occurred in the cryptocurrency market in recent weeks, with retail investors playing a larger role in this sell-off than institutional investors. Bitcoin fell by 16% in April, marking the largest monthly decline since June 2022.

As for institutional investors, the report stated:

However, despite the reduction in holdings by quantitative funds and CTAs in the market, JPMorgan’s analysis of the futures market shows that other types of institutional investors have reduced their holdings to a relatively smaller extent. This indicates that traditional institutional investors such as retirement funds and insurance companies, apart from quantitative funds and CTAs that rely on mathematical and computer models for decision-making, have not significantly reduced their holdings in Bitcoin or other investments.

Nevertheless, the analysis of the futures market indicates that “the position reduction by other institutional investors (excluding quantitative funds and CTAs) is relatively limited,” the author wrote.