JPMorgan maintains 'cautious' stance on crypto markets over the near term

JPMorgan continues to advise exercising caution in the crypto markets in the near future due to several factors, including a lack of positive indicators and declining retail investor interest.

"With a lack of positive catalysts, with the retail impulse dissipating and with the three headwinds mentioned previously in our publication (elevated positioning, high bitcoin prices vs. gold and vs. the estimated bitcoin production cost, subdued crypto VC funding) still in place, we maintain a cautious stance on crypto markets over the near term," JPMorgan analysts, led by Nikolaos Panigirtzoglou, wrote in a report on Thursday.

The past two weeks have seen "significant" selling or profit-taking in the crypto market, with perhaps retail investors playing a bigger role than institutional investors, according to the analysts.

"In fact retail investors appear to have sold both crypto and equity assets during April," the analysts said.

They added that not only have spot bitcoin exchange-traded funds seen outflows in April, but indicators of retail interest in stocks, such as net flow into equity funds, have also decreased over the past month.

"The net flow into equity funds turned negative in April after strong buying in February and March," the analysts said.

As for institutional investors, momentum traders like commodity trading advisors and quantitative funds have been taking profits on their previous "extreme long" positions in both bitcoin and gold, according to the analysts. However, other institutional investors, beyond CTAs/quantitative funds, have been reducing their positions to a lesser extent, the analysts concluded.

Last month, JPMorgan analysts warned of a potential bitcoin price drop after halving as the event was already priced in, according to them. In February, the analysts predicted the bitcoin price would drop to $42,000 after halving, citing reduced miner rewards and higher production costs.

The current price of bitcoin is around $58,900, according to The Block's prices page.

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