- JPMorgan analysts have expressed doubts about the sustainability of the recent crypto market rally, stating that the “crypto rally appears to have gone too far.”
- Analysts emphasized that there are already spot Bitcoin ETFs in Canada and Europe, which have not attracted much interest from investors since their launch.
- Despite visible setbacks, JPMorgan analysts are uncertain about whether crypto regulations will ease in the future.
JPMorgan analysts examined the current outlook for Bitcoin and the cryptocurrency market and discussed the sustainability of the cryptocurrencies’ price rally.
JPMorgan Analysts Review the Crypto Rally
JPMorgan analysts have expressed doubts about the sustainability of the recent crypto market rally, stating that the “crypto rally appears to have gone too far.” They identified two main factors that appear to have caused the recent rally in the crypto market over the past month.
The first factor is the possibility of approval for a spot Bitcoin ETF in the United States, which could bring new capital into the crypto markets. However, analysts are skeptical of these factors or arguments.
JPMorgan analysts stated: “First, instead of fresh capital flowing into the crypto industry in newly approved ETFs, we see a more likely scenario where capital migrates from existing Bitcoin products, such as Grayscale Bitcoin trust, Bitcoin futures ETFs, and publicly traded Bitcoin mining companies, to newly approved spot Bitcoin ETFs.”
They also reiterated that there are already spot Bitcoin ETFs in Canada and Europe, which have not attracted much interest from investors since their launch. Hence, they doubt that fresh capital will flow into newly approved spot Bitcoin ETFs in the U.S.
The Crypto Industry Remains Unpredictable
The second major factor that has fueled the recent crypto rally is the defeats of the SEC in the legal cases involving Ripple and Grayscale. However, despite these visible setbacks, JPMorgan analysts are uncertain about whether crypto regulations will ease in the future.
Analysts explained: “Given the unpredictability of the crypto industry’s regulatory environment, it is far from certain that crypto industry regulations will significantly ease going forward. We do not anticipate U.S. crypto industry regulations to change, especially with the lessons learned from the FTX fraud, due to the two aforementioned legal cases.”
Bitcoin Halving Priced In
Another reason that makes some people optimistic about the future of crypto markets is the upcoming Bitcoin halving event scheduled for April/May 2024. This event is based on the idea that it could reduce the new Bitcoin supply, leading to a rise in Bitcoin’s price. However, according to JPMorgan analysts, the halving event has already been priced in: “This argument is considered to be a predictable event and its impact on Bitcoin’s price is believed to be well-reflected.”
The analysts continued: “For example, based on current hash rates and difficulty, it is estimated that the production cost of Bitcoin will increase from the current $21,000 to around $43,000 after the halving event. However, with the current price at approximately $35,000, this scenario appears to be consistent with a hash rate decline of around 20%, due to miners in higher-cost locations or with less efficient equipment exiting the market, which may indicate that the halving event is largely priced in.”
Overall, the analysts are “cautious about the crypto markets in the near term” and believe that there is a high probability of a “buy the rumor, sell the fact” effect after the SEC approves spot Bitcoin ETFs following the approaching event.
