JPMorgan points to weak Bitcoin futures as signal for bear market
For all the intensity of the crypto market, a challenge for many traders is a lack of volatility. Positive news (a new exchange, an investment, a new exchange listing, launch of new products) can quickly be overwhelmed by a series of sell-offs as the market reacts.
As Bitcoin futures contracts expire, JPMorgan Chase’s chief financial officer said investors may be able to profit from the upcoming low prices. “If we pay attention to the spot price in the spot market versus the future price, we can certainly see that there’s a discrepancy there,” CEO Jamie Dimon said on a call with analysts. “We can’t tell you what that means, but the contract is expiring, and we can’t ignore that,” Dimon said.
Bitcoin’s first futures contracts were launched on Sunday by the Intercontinental Exchange (ICE), enabling investors to bet on the price of the digital currency. The contracts, which provide a way to bet on the future price of Bitcoin, are set to expire on December 28, but have already come under fire from a number of analysts.. Read more about bear market crypto 2021 and let us know what you think.
Crypto-currency analysts at JPMorgan pointed to the difference between bitcoin (BTC) spot and futures prices as a potential bearish sign for the market. In a note to clients, JPMorgan analysts led by Nikolaos Panigirtzoglu, global market strategist, wrote Thursday that the bitcoin market has returned to backwardation – a situation in which spot prices are higher than futures prices. Analysts noted that the correction in cryptocurrency markets last month caused bitcoin futures to reverse for the first time since 2018. According to strategists, the lag in bitcoin futures should be seen as a negative sign for the price of BTC, despite the market’s strong rise in the past two days, with bitcoin hitting $37,500 on Thursday. Analysts noted that the bitcoin futures curve was in revision for most of 2018, with bitcoin falling 74% after reaching an all-time high of $20,000 in late 2017 : We believe that the movement of backwardation in recent weeks was a negative signal indicating a bear market […] In our opinion, the movement of bitcoin futures into backwardation is a bearish signal that will be repeated in 2018. In its latest analysis, JPMorgan pointed to the 21-day moving average of the second spread of bitcoin futures against spot prices. Analysts noted this unusual development and a reflection of the current weak demand for bitcoin from institutional investors trading futures on the Chicago Mercantile Exchange. Analysts also noted that bitcoin’s declining share of the total value of the cryptocurrency market is another worrying trend. As previously reported by Cointelegraph, bitcoin’s share of crypto-currency markets fell to a three-year low of 40% at the end of May, after reaching 70% in January this year. At the time of writing, bitcoin accounts for 43% of the total market capitalization of cryptocurrencies and $682 billion out of a total value of $1.6 trillion, according to CoinMarketCap. Some analysts, such as crypto-currency index provider Stack Funds, believe BTC’s dominance could return to previous highs in the near term. Graph of bitcoin’s percentage dominance over time. Source: CoinMarketCap On the heels of another 24-hour sell-off, bitcoin futures markets are getting hit by bearish factors. Today’s big loss comes at the end of a two-day sell-off in the CME’s December contracts that took bitcoin down almost $1,000.. Read more about bitcoin price and let us know what you think.