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JPMorgan is cautious on cryptocurrencies as retail investors abandon stocks following ETF hype
Retail dollars exited bitcoin ETFs in April, and JPMorgan is encouraging investors to take a cautious stance on the cryptocurrency for now. The firm had previously predicted that the long-awaited Bitcoin halving had already been priced in prior to the April 19 event and that there would be some downward pressure in the weeks following its completion. Analysts cited overbought conditions, high pricing relative to gold and little activity in venture capital funding. It has since fallen 6%, according to Coin Metrics. “The last two weeks have seen significant selling and profit-taking, with perhaps retail investors playing a larger role than institutional investors,” JPMorgan’s Nikolaos Panigirtzoglou said in a note Thursday. “Indeed, not only did spot bitcoin ETFs experience outflows in April, but our indicators of retail momentum into stocks have also declined over the past month.” “With the lack of positive catalysts, with retail momentum dissipating, and with the three previously mentioned headwinds… still in place, we maintain a cautious stance on cryptocurrency markets in the near term,” Panigirtzoglou said. Technical analysts also said bitcoin could slide to around $50,000 after the cryptocurrency fell below the key $60,000 support level on Wednesday, but added that the long-term uptrend remains intact. Investors and analysts often point out that the price action around the halving tends to be insignificant: a headline event, but not something that affects the price of bitcoin in the short term. BTC.CM= 1 million Bitcoin (BTC) in the last month In the two weeks leading up to the conclusion of Wednesday’s Federal Reserve meeting, cryptocurrencies were also put under pressure by macro uncertainties about inflation. The central bank ultimately kept rates unchanged. Panigirtzoglou noted that in addition to cryptocurrencies, retail investors also sold stocks in April and that momentum towards stocks also waned. “This is demonstrated by… the net flow into equity funds, including ETFs and mutual funds, typically used by retail investors… [which] it turned negative in April after strong buying in February and March,” he said.