According to a recent research report by JPMorgan, the crypto market is expected to rebound from August onward. This positive outlook comes on the heels of a reduced year-to-date net flow estimate by the bank.
Reduced Net Flow Estimate
In its latest report, JPMorgan has reduced its year-to-date net flow estimate to $8 billion from $12 billion previously. This reduction is largely driven by the decline in bitcoin reserves across exchanges over the past month. Analysts led by Nikolaos Panigirtzoglou note that this decline in reserves is likely a reflection of various factors, including:
- Liquidations by creditors of Mt. Gox and Gemini: The defunct crypto exchange Mt. Gox and its creditors have been liquidating their bitcoin holdings, contributing to the decline in reserves.
- Selling by the German government: The German government has been offloading its seized cryptocurrency assets, which are believed to be worth millions.
Bitcoin Reserves Across Exchanges
The bank’s reduced estimate of $8 billion is comprised of various components, including:
- $14 billion net flow into crypto funds by July 9: This significant inflow into crypto funds has contributed to the reduction in reserves.
- $5 billion Chicago Mercantile Exchange (CME) futures flows: The CME’s futures contracts have seen increased activity, driving up the demand for bitcoin and contributing to the decline in reserves.
- $5.7 billion of fundraising by crypto venture capital funds year-to-date: Venture capital firms have been raising significant amounts of money from investors, which has contributed to the increase in demand for cryptocurrency assets.
- $17 billion adjustment to account for rotation from wallets on exchanges to new spot bitcoin exchange-traded-funds (ETFs): The shift towards ETFs has led to a reduction in reserves as investors move their funds into these newly available products.
Market Outlook
JPMorgan’s analysts are skeptical about the prior estimate of $12 billion continuing for the rest of the year. They note that bitcoin’s price is currently high relative to its production cost or the price of gold, which suggests that the market may be due for a correction.
The bank’s research team believes that crypto liquidations should abate this month and the market is expected to rebound from August onward. This positive outlook is based on several factors, including:
- Increased demand: The growing interest in cryptocurrency assets, driven by institutional investors and venture capital firms, is expected to drive up demand.
- Improved sentiment: As the market continues to mature, investor sentiment is expected to improve, leading to increased buying activity.
- Reduced selling pressure: The reduced selling pressure from Mt. Gox creditors and the German government is expected to contribute to a more stable market.
Conclusion
In conclusion, JPMorgan’s research report suggests that the crypto market is due for a rebound from August onward. The bank’s reduced net flow estimate of $8 billion reflects the decline in reserves across exchanges and the shift towards ETFs. While there are still risks associated with investing in cryptocurrency assets, the market’s positive outlook suggests that investors should be cautiously optimistic.
Recommendations
Investors considering investing in cryptocurrency assets should:
- Conduct thorough research: Understand the underlying technology, market trends, and regulatory environment before making any investment decisions.
- Diversify their portfolios: Spread investments across different asset classes to minimize risk.
- Monitor market developments: Stay informed about market news, trends, and regulatory updates.
By following these recommendations, investors can make informed decisions and potentially benefit from the expected rebound in the crypto market.
