JPMorgan Strategist Claims that Bitcoin Futures Backwardation Points Towards Bear Market

JPMorgan Chase financial Analyst and Advisor Nikolas Panigirtzoglou issued a suggestion note for their clients. The note issued claims to take notice of the difference between the spot prices and futures prices trends for the flagship cryptocurrencies. It should be noted that spot price refers to the current market value of a tradable unit. Meanwhile, futures price represents a contract for sell or purchase of assets at a fixed price for a later date.

The global market strategist claims that due to the recent volatility and frequent corrections of beacon coin, BTC futures have traveled towards backwardation. He explained that in the past week, the future backwardation started to look like the one that happened in 2018. Taking note of the current recovery of Bitcoin when the flagship cryptocurrency was restored to $37,500, he said that it would not make much of a difference.

Bitcoin Institutional Demand is Decreasing, according to the Observations Shared by the JPMorgan Analyst

Panigirtzoglou further added in his note addressed to the firm clients that the institutional interest for Bitcoin has been on a decline. He shared a charted behavior that contained 21 days moving average for futures trends over spot prices to provide evidence for his claims. In an earlier observation, Panigirtzoglou mentioned that in 2018 when futures prices were decreasing in comparison to spot prices, the beacon cryptocurrency lost about 74% of its value.

The report claims that JPMorgan believes that Bitcoin is heading towards a bear market in a personalized statement. They added that the cause of this bearish trend is a reversion of Bitcoin futures prices into the backwardation like 2018. The weakened adoption of Bitcoin for institutions has been observed on the Chicago Mercantile Exchange Market. 

In the end, Panigirtzoglou also expressed his concerns about the rapid drop in Bitcoin’s crypto market cap share. In January, the BTC market cap made up about 70% of the entire crypto evaluation. However, after hitting an ATH of $67,500 in April, the Bitcoin price dropped about 300% in March. During the 4th month of 2021, the Bitcoin market cap share stood as low as 40%.

This sharp drop took Bitcoin to the lowest relevant scale in three years. However, at press time, Bitcoin is trading for $37,500, showing signs of recovery and making up for 43% of the total crypto market cap. According to JP Morgan’s client note, this point signifies another reason for a possible bear market. With the current price mark, the Bitcoin market cap is valued at $682 billion.

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