JPMorgan Analysts Cast Doubt on Crypto Rally’s Sustainability

In a recent report, JPMorgan analysts led by Nikolaos Panigirtzoglou expressed skepticism about the sustainability of the recent surge in the cryptocurrency market, stating that the “crypto rally looks overdone.” The analysts identified two major factors that have contributed to the market rally, but their doubts raise questions about the long-term prospects.

One significant factor driving optimism in the crypto market is the potential approval of a spot bitcoin ETF in the U.S. The analysts believe that this could attract new money to the crypto markets and potentially influence the Securities and Exchange Commission (SEC) to adopt a more lenient approach in the future. However, JPMorgan remains skeptical of this scenario, suggesting that existing capital may merely shift from established bitcoin products to the newly approved spot bitcoin ETFs.

The analysts highlight their concerns by pointing to the limited interest in spot bitcoin ETFs in Canada and Europe, suggesting that historical precedents cast doubt on the influx of fresh capital into newly approved U.S. ETFs.

Additionally, some market participants are optimistic about the future of crypto markets due to the upcoming Bitcoin halving event in April/May 2024. This event, which reduces the supply of new bitcoins, is expected to drive up the bitcoin price. However, JPMorgan analysts argue that the halving event’s impact is already priced into the market.

According to the report, the predictable nature of the halving event and its effects make the argument for a higher bitcoin price less convincing. The analysts note that the current bitcoin production cost, factoring in hash rates and difficulty, is consistent with the current market price, suggesting that the halving event might already be largely factored into the current price.

In conclusion, JPMorgan analysts are cautious about the crypto markets moving forward, emphasizing a high likelihood of a ‘buy the rumor/sell the fact’ effect following the anticipated SEC approval of spot bitcoin ETFs. The report underscores the need for investors to approach the current crypto rally with a discerning eye, considering potential shifts in capital and the already factored-in nature of significant market events.

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