Cryptocurrency enthusiasts who rely on Bitcoin to return above the $ 40,000 level are facing a challenge due to the faltering demand for the largest fund pursuing digital assets, according to JPMorgan Chase & Co.
The pace of flows in 20 billion dollars Grayscale Bitcoin Trust “seems to have peaked” based on four-week moving averages, JPMorgan-led strategies by Nikolaos Panigirtzoglou said in a note on Friday. The fund fell 22% in the last two weeks to January 22, surpassing a 17% drop in Bitcoin over the same period.
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“Right now, the institutional flow momentum behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to break out over $ 40,000,” the strategists said. They added that “the risk is that impulse traders will continue to develop Bitcoin futures.”
Bitcoin’s red rally lost momentum after its largest cryptocurrency peaked at nearly $ 42,000 on January 8th. Proponents say institutional interest has helped bolster the use of Bitcoin as a hedge against the dollar’s weakness and inflation, while skeptics say the latest rise is still a balloon speculation, similar to the 2017 mania that preceded a rapid collapse.
“The short-term risk balance is still at a disadvantage,” JPMorgan strategists said.
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 coins traded has risen since October and has remained high ever since.
“Old-school bitcoin sellers have sold some of their old bags to new institutional buyers with extremely large new bags to fill,” James wrote. OKEx Insights is affiliated with the OKEx crypto exchange.
Bitcoin advanced about 2% to $ 32,700 as of 11:43 a.m. in Tokyo on Monday. The digital currency is still gaining about 260% in the last year, despite falling about $ 10,000 from this month’s high.