3 months ago
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JPMorgan’s report shows limited de-risking by institutional investors in bitcoin futures. Their futures position indicator confirms this confidence, tracking open interest in CME Bitcoin futures.
The crypto market reeled on Monday, experiencing its worst correction since the FTX collapse, with Bitcoin (BTC) prices plunging over 15% before making a notable recovery. As JPMorgan analysts observed, this rebound was driven by the steadfast support of institutional investors.
In a report by JPMorgan, Managing Director Nikolaos Panigirtzoglou emphasized that institutional investors showed limited de-risking in the bitcoin futures market. According to the report, this confidence is reflected in JPMorgan’s futures position indicator, which monitors open interest in CME bitcoin futures contracts.
Moreover, the indicator, along with the positive slope of the futures curve, points to a bullish sentiment among these institutional players. A higher premium of bitcoin futures over the spot price indicates a strong conviction among futures investors.
Factors Driving Institutional Optimism
Several factors are contributing to institutional investors’ continued optimism. Notably, Morgan Stanley recently granted its wealth advisors the flexibility to recommend spot bitcoin exchange-traded funds (ETFs) to a select clientele. This move represents a significant step forward for the institutional adoption of cryptocurrency assets.
Analysts now view major liquidations from the Mt. Gox and Genesis bankruptcies as less of a threat. They expect that cash disbursements from the FTX bankruptcy later this year will provide crucial liquidity and stimulate demand in the crypto market. Additionally, encouraging signals from both major US political parties about favorable crypto regulations boost investor confidence.
JPMorgan analysts emphasize that the recent market correction stemmed primarily from contagion effects, mirroring the downturn experienced in traditional risk assets like equities. However, media reports suggest that a specific crypto trading firm, Jump Crypto, might have exacerbated the decline by liquidating significant amounts of ether.
Institutional investors played a key role in the market rebound. However, retail investors displayed a different trend. The report shows spot bitcoin ETFs experienced their highest monthly net outflow since their launch earlier this year, indicating these investors’ retreat from the market.
Moreover, momentum traders, including commodity trading advisors, took advantage of the downturn by closing long positions and starting short ones.
JPMorgan Maintains Cautious Outlook
Despite the recent resilience of Bitcoin, JPMorgan analysts remain cautiously optimistic about the future of the cryptocurrency market. They acknowledge the positive catalysts mentioned above but warn that these factors are already largely priced in.
Furthermore, the ongoing vulnerability of equity markets alongside limited de-risking activity in the CME Bitcoin futures market suggests a need for continued vigilance. As a result, the analysts recommend maintaining a cautious approach to the crypto market for the foreseeable future.
