Markets
The cryptocurrency market sell-off has been driven by retail investors, says JPMorgan (JPM).
Wall Street giant JPMorgan (JPM) said it will maintain its cautious stance on cryptocurrency markets in the near term due to the lack of positive catalysts and because retail momentum is disappearing.
The bank notes that retail investors sold both cryptocurrencies and equity assets in April, and bitcoin exchange-traded funds (ETFs) saw outflows. THE three contrary winds the bank has already identified: the high positioning, high prices of bitcoin relative to gold and compared to the estimated production cost of bitcoin, and modest crypto venture capital (VC) funding are still in place.
Cryptocurrency markets have seen significant profit-taking in recent weeks, with retail investors playing a larger role in the sell-off than institutional investors, the report said. Bitcoin plunged 16% in April, the biggest monthly drop since June 2022.
Investors sold US-based Bitcoin spot ETFs fastest pace ever on Wednesday. The 11 ETFs saw cumulative net outflows of $563.7 million, the largest since the funds began trading on Jan. 11.
As for institutional investors, “it was mostly momentum traders such as commodity trading advisors (CTAs) or other quantitative funds who profited from previous extremely long positions in both bitcoin and gold,” wrote analysts led by Nikolaos Panigirtzoglou.
However, analysis of the futures market suggests “more limited position reduction by other institutional investors outside of quant funds and CTAs,” the authors wrote.