JPMorgan Analysts Say Bitcoin Rally ‘Overdone’, Question Crypto Market Fundamentals

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Trent Alan

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November 9, 2023 11:56 EST

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In a report published Wednesday, JPMorgan analysts cast doubt on the sustainability of the latest bitcoin rally, stating that the sharp gains look ‘overdone’ relative to the cryptocurrency’s underlying fundamentals.

Analysts led by Nikolaos Panigirtzoglou identified two primary catalysts behind bitcoin’s 30% price surge over the past month — the prospect of a spot bitcoin ETF approval in the US, and crypto legal victories against the SEC. The analysts remain unconvinced that these factors justify the scale of the Bitcoin rally, however.

Bitcoin Rally’s Sustainability Questioned

The analysts are skeptical of both the above catalysts behind the latest crypto rally.

“Instead of fresh capital entering crypto markets, we see existing capital in bitcoin products shifting into newly approved spot bitcoin ETFs,” they wrote.

Panigirtzoglou pointed to spot bitcoin ETFs in Canada and Europe that have seen little inflows since launching, suggesting there is limited potential for large inflows into US spot bitcoin ETFs, despite high hopes.

The analysts also questioned whether recent legal defeats would cause the SEC to relax its regulatory stance.

“U.S. crypto industry regulations are still pending and we do not believe U.S. lawmakers would shift their stance because of the legal cases, especially with the memories from the FTX fraud still fresh,” they stated.

Bitcoin Price Surge Seen as Overdone

Another potential upside catalyst is Bitcoin’s upcoming ‘halving’ event in 2024, which reduces the supply of new bitcoins. JPMorgan believes this is already priced in, however.

“This argument seems unconvincing as the bitcoin halving event and its effect are predictable and in our opinion are well factored into bitcoin price,” the report explained.

In short, JPMorgan sees risks that the recent Bitcoin rally may falter amidst unstable fundamentals. The analysts are “cautious on crypto markets with chances of a ‘buy rumor, sell fact’ decline after any spot bitcoin ETF approval.”

The report comes as Bitcoin trades near $36,000, up over 110% year-to-date after a dismal 2022 saw the cryptocurrency plunge 64%. However, Bitcoin is still trading around 48% below its all-time high of nearly $69,000 reached in November 2021.

Crypto markets have proven vulnerable to sharp sell-offs despite previous technical breakthroughs. Most recently, FTX’s collapse wiped out over $200 billion in crypto market value, bringing down majors like Bitcoin and Ethereum.

While some investors eye Bitcoin’s halving and the possibility of a US spot Bitcoin ETF as potential upside catalysts this year, JPMorgan sees risks prevailing over any lasting rally. For now, the banking giant remains firmly on the sidelines of the crypto boom.