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Despite recent market fluctuations, institutional investors did not reduce risk in Bitcoin (BTC) futures, contributing to the largest cryptocurrency’s price rebound. According to JPMorgan analysts, this recovery in the cryptocurrency market requires cautious optimism.
Institutional Investors Raised the Price
On Monday, the cryptocurrency market experienced its sharpest drop since the FTX crisis, with Bitcoin’s price falling over 15% to as low as $48,800. The price quickly rebounded to over $57,000 following this drop. JPMorgan analysts noted that the primary reason for this rapid recovery was that institutional investors did not reduce risk in Bitcoin futures.
JPMorgan’s futures position indicator tracks the cumulative open positions in CME Bitcoin futures contracts, and the positive slope of the futures curve indicates an optimistic outlook among these investors. According to analysts, the futures price premium over the spot price shows these investors’ confidence in Bitcoin.
Analysts noted several reasons for institutional investors’ optimism. Last week, Morgan Stanley began recommending spot Bitcoin exchange-traded funds (ETFs) to some clients. Additionally, large liquidations resulting from the Mt. Gox and Genesis bankruptcies are behind us, and cash payments from the FTX bankruptcy could increase demand in the cryptocurrency market later this year.
Moreover, the support of favorable regulations for cryptocurrencies by major political parties in the US is also fueling the bullish wave in the cryptocurrency market. However, analysts warn that these positive factors are largely priced in.
Although Bitcoin’s price has risen above $57,000 again, approaching JPMorgan’s production cost of approximately $45,000 is concerning. Analysts note that if the price of the largest cryptocurrency stays at this level or falls for a longer period, it will put pressure on Bitcoin miners, creating further downward pressure on the price.
Causes of the Recent Drop Identified
Alongside all this, the dramatic drop in Bitcoin was not a result of issues specific to the cryptocurrency market but rather contagion from corrections in traditional risky assets (such as stocks). In contrast, data shows that certain cryptocurrency trading companies contributed to the drop by selling large amounts of Ethereum (ETH). Although analysts did not name the company directly, it is understood to be Jump Crypto.
Currently, while institutional investors are helping Bitcoin recover, retail investors are contributing to the decline. Spot Bitcoin exchange-traded funds experienced their largest monthly outflow so far this month. Additionally, momentum investors like commodity trading advisors played a role in this drop by closing long positions and taking short positions.
