JPMorgan Remains Cautious on Bitcoin as Positive Catalysts Mostly Priced-In

JPMorgan noted that positive catalysts that will drive the price of Bitcoin and the broader cryptocurrency market are already being factored in.

The positioning in the BTC futures market and macroeconomic concerns are causing the bank to be cautious about digital assets.

Banking giant JPMorgan said that catalysts that could push the price of Bitcoin {{BTC}} and the broader cryptocurrency markets higher have been largely factored in.

Digital asset prices saw their biggest sell-off since the 2022 FTX crash earlier this week, driven mostly by contagion in traditional markets, with bitcoin falling more than 15% before recovering slightly, the bank’s analysts wrote. While the sell-off in crypto was mostly driven by retail investors, momentum traders also contributed by exiting long positions and creating short positions, the bank said.

The rapid correction began after the Bank of Japan raised its benchmark interest rate last week, leading to a stronger yen and the elimination of the “carry trade” — a strategy in which traders borrow low-yielding yen to speculate in higher-yielding assets. While both traditional and digital asset markets have since stabilized, many investors remain concerned.

Meanwhile, analysts said institutional investors showed limited or no “risk aversion” in the bitcoin futures market, which has been showing sideways movement with limited open interest and spot price spread.

The JPMorgan team noted that there are several catalysts that could sustain institutional investors’ optimism about bitcoin and the crypto sector, including Morgan Stanley wealth advisors offering cryptocurrencies to their clients, the near-end of bankruptcy payments, and both political parties in the US pointing to positive regulations.

However, the bank said that these positive catalysts are already factored into the current price of digital assets. “With limited de-risking in CME bitcoin futures and equity markets still looking vulnerable… we remain cautious on the cryptocurrency market despite the recent correction.”

This cautious statement from JPMorgan is not new; the bank recently said that any near-term recovery in cryptocurrency markets is likely to be short-lived as the price of Bitcoin is still very high relative to its production cost and gold.

The bank’s analysts estimate that the average production cost of Bitcoin mining is currently around $49,000, and any price movement below this level will put pressure on miners, further negatively impacting the BTC price.

Read more: Any Short-Term Reversal in Crypto Market Likely to Be Temporary: JPMorgan