JPMorgan Strategists Warn BTC’s Momentum Could Collapse
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JPMorgan strategists warn that BTC’s momentum could collapse if it fails to break above $60,000 again.
JPMorgan Managing Director Nikolaos Panigirtzoglou recounts seeing such negative price action for BTC in the past year. However, in those instances, buyers were able to return in time to prevent deeper slumps. This time, he reports feeling greater concern.
BTC momentum signals decay
According to research by Panigirtzoglou-led strategists, momentum signals could collapse if BTC fails to surpass $60,000 again soon. The strategists say that commodity trading advisors and crypto funds were likely behind the recent buildup of long BTC futures. They also cite them as responsible for the recent selloff.
“Over the past few days, BTC futures markets experienced a steep liquidation in a similar fashion to the middle of last February, middle of last January, or the end of last November,” the strategists reported. “Momentum signals will naturally decay from here for several months, given their still-elevated level.”
However, the strategists note that BTC quickly recovered in those instances. According to the strategists, “the overall flow impulse was strong enough to allow BTC to quickly break out above the key thresholds, yielding further buildups in position by momentum traders.” Although in this case, they note, whether that will happen again remains to be seen.
According to JPMorgan strategists, the chance that this will happen again seems much less certain. The strategists say the momentum decay is more advanced at this point, making it harder to reverse. They also mentioned that flows into BTC funds appear weak.
Previous momentum concerns
Regarding BTC’s negative price action in November, Panigirtzoglou had also expressed concern over “momentum traders.” He had also highlighted BTC funds, in particular the Grayscale BTC Trust.
JPMorgan strategists said at the time that “a failure by the Grayscale BTC Trust to receive additional inflows over the coming weeks would also cast doubt on the idea that institutional investors” would embrace BTC.
Since then, Grayscale’s total assets under management have swelled from $10.8 billion to $44.9 billion. In particular, Grayscale’s BTC Trust has increased from $9.049 billion to $36176 billion.
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