JPMorgan Warns About the Recent Rally in the Cryptocurrency Market

JPMorgan, one of the leading investment banks in the world, has issued a warning that the recent rally in the cryptocurrency market seems to have gone “overboard”. JPMorgan analysts are taking a cautious approach to the future of the cryptocurrency market.

JPMorgan Shares Warnings About the Recent Rally in the Cryptocurrency Market

JPMorgan has issued a warning, stating that the recent rally in the cryptocurrency market has gone overboard. The bank’s analysts have expressed doubts about the sustainability of the upward movement in the cryptocurrency market.

According to JPMorgan analysts, two main factors have contributed to the recent surge in the cryptocurrency market. In their report led by Nikolaos Panigirtzoglou, the analysts emphasized the expectation of the approval of a new spot Bitcoin ETF in the US that could bring new capital to the cryptocurrency market. However, the analysts approached this expectation and the potential effects of an approved spot Bitcoin ETF with skepticism. In their report, they stated, “Firstly, instead of investing in newly approved ETFs, we see it more likely that existing capital will shift to existing Bitcoin investment products.”

Furthermore, analysts have doubts about the ability of spot Bitcoin ETFs to attract new capital in the US, despite the fact that these products are already available in Canada and Europe. The bank’s analysts seem to have taken a cautious approach to the sustainability of the recent surge in the cryptocurrency market.

According to JPMorgan analysts, the second significant factor triggering the recent surge in the cryptocurrency market has been the losses in the Ripple and Grayscale cases decided by the US Securities and Exchange Commission (SEC). However, the analysts stated that despite these losses, the future shape of cryptocurrency regulations remains uncertain.

In their analysis, they stated, “Given how volatile this sector is, there is no definite sign that regulatory tightening for the cryptocurrency market will significantly ease in the future. Cryptocurrency regulations in the US are still uncertain, and especially with the fresh memories of the FTX fraud, we do not believe that regulatory approaches in the US will change rapidly due to the two aforementioned cases.”

JPMorgan analysts emphasized the uncertainty about the future of cryptocurrency regulations and added that developments and regulations in this field have not yet fully clarified.

“Bitcoin’s Halving Event is Priced In”

Another reason for optimism for some investors regarding the future of the cryptocurrency market is the halving of Bitcoin’s block reward expected to occur in April/May 2024. This event is seen as a development that could reduce the new BTC supply and pave the way for a higher price. However, according to JPMorgan analysts, the halving event is already priced in.

The analysts stated, “We do not find this argument convincing because we believe that Bitcoin’s halving event and its impact are predictable and have already been reflected in the price of Bitcoin. For example, when we look at the production cost of Bitcoin after the block reward halving using the current hash rate and mining difficulty, we see that the production cost will increase from above $21,000 to around $43,000. However, with the current price being approximately $35,000, this would result in the withdrawal of miners operating in more expensive locations or using less efficient equipment, leading to a decrease in the hash rate by about 20%, which seems reasonable to us. This indicates that the block reward halving has largely been priced in.”

In general, the analysts have taken a cautious approach to the potential “buy the rumor, sell the news” effect that spot Bitcoin ETFs could have on the overall cryptocurrency market after the imminent approval by the SEC.