JPMorgan maintains a cautious stance on cryptocurrency markets in the near term due to a lack of immediate catalysts for bullish market moves, citing moderate ETF inflows and regulatory challenges.
In a detailed market update, the Wall Street giant identified the headwinds that are currently affecting the cryptocurrency market. The analysis focused on the performance of ETFs, the implications of the fourth Bitcoin halving, and broader regulatory developments.
“Perhaps these April rains and its poorest month for the crypto ecosystem will bring May flowers and fresher crypto profits and increased activity, but the first The days of May are not noticeably better than those of April and it is difficult for us to find the next catalyst for the crypto ecosystem,” says a report.
Despite the recent slowdown in April, JPMorgan sees mixed signals with potential upside as investors return to the market after a brief pause. The report details $218 million in net sales of US spot Bitcoin ETFs on its 80th day of trading, with Fidelity's FBTC and ARK/21Shares' ARKB leading the flows.
In contrast, GBTC continued to record net redemptions, totaling more than -$17.4 billion since its conversion. JPMorgan sees this continued outflow even though GBTC recorded a rare day of positive inflows earlier in the week.
April proved challenging for crypto markets as the total market capitalization declined by 17%, erasing gains from a strong first quarter. Both Bitcoin and Ethereum saw price drops of 15-20%, with altcoins seeing even steeper drops. Despite this, stablecoins showed resilience with a slight increase in market capitalization.
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The JPMorgan report also highlights the effects of the fourth Bitcoin halving, which took place on April 19, reducing daily Bitcoin creation from 900 to 450. Historically, BTC halvings are considered catalysts for positive prices due to perceived increased scarcity. However, the immediate impact was moderate, and Bitcoin prices fell slightly after the halving.
In terms of regulatory development, the report mentions Hong Kong's approval of Bitcoin and Ethereum spot ETFs, in contrast to the US Securities and Exchange Commission's (SEC) hesitancy over similar applications. Still, JPMorgan remains cautious as disappointing flows and volumes marked the debut of a Hong Kong ETF.
The recent JPMorgan report also presents a contrasting picture between Bitcoin and gold for April. Bitcoin saw a 15% drop, while gold rose 4% to hit new all-time highs. Interestingly, both assets saw their volatility decrease by approximately 12% last month.
Ethereum didn't fare well either, falling behind Bitcoin for the second month in a row with a drop of 18%. Its market capitalization dropped to $368 billion in April, although it is still up 34% so far this year. Ethereum's decline was accompanied by a 30% drop in its average daily trading volume.
Meanwhile, the outlook for Ethereum in the US appears bleak, especially regarding regulatory approval of ETH spot ETFs. After some positive discussions with the SEC, insiders are preparing for a likely rejection of pending ETF applications on May 23.
While there has been some improvement in DeFi activity, the bank notes that “market capitalization and total value locked also decreased in April.”
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“However, stablecoins were a bright spot for the crypto ecosystem, as the largest stablecoins saw their market capitalization increase by single digits month-on-month,” the bank added.
