Analysts at JP Morgan, the largest bank in the United States, have compelling reasons to believe that a long-term surge in the price of Bitcoin and other digital currencies is unlikely, at least for the foreseeable future.
According to Barron's, on Wednesday, Bitcoin experienced a 4.5% drop from $37,860 to a low of $36,160 and has not managed to recover its position before this fall. Meanwhile, on Tuesday, an upward moveme began in the US stock market, which coinued uil Wednesday; A jump that was obviously influenced by the publication of positive inflation statistics on November 14 (November 23).
Decreasing inflation is always considered a positive sign for the US ceral bank to stop raising ierest rates, which can reduce the pressure in the market of risky assets such as stocks and digital currencies.
Now, the poor performance of cryptocurrencies compared to the stock market raises questions about the underlying reasons for the rece jump in the price of these assets. Nikolaos Panigirtzoglou and several other JP Morgan analysts have recely poied out in a note that the rece growth of Bitcoin and digital currencies has been more than reasonable and they have put forward reasons for it.
The main reason for the rece jump in prices was investors' hopes that the US Securities and Exchange Commission would soon approve the launch of the first exchange-traded fund or Bitcoin Cash ETF. The assumption of a part of the market is that with the approval of these ETFs, a new wave of capital will be formed in the market, and at the same time, it is a sign of the softening of the coury's legislators against these assets. But Panigirtzaglu thinks that this situation may not be sustainable.
He says about this:
Aside from eirely new capital flowing io cash ETFs that may be approved in the future, a more likely scenario is that (instead of new capital) capital in existing financial products that are somehow tied to Bitcoin, such as the BitFund GrayXil's coin, futures ETFs and shares of companies active in the field of Bitcoin mining, eer the newly approved ETFs.
Panigirtzaglu also poied out that there are currely cash ETFs in Canada and Europe, but investors have shown little ierest in these financial products.
Despite the SEC's defeat against Ripple over the XRP token, as well as the review of Grayscale's request to convert its Bitcoin fund io a cash ETF, JP Morgan analysts still don't buy io the idea that US regulators are softening their view of digital currencies.
Panigirtzaglu said:
Given that the cryptocurrency industry remains largely lawless, it is unlikely that regulatory pressures will ease significaly in the near future. Legislation of the digital currency industry in the US is still pending, and we do not believe in the idea that US lawmakers will change their stance.
JP Morgan analysts have also meioned the Bitcoin halving eve, which is supposed to happen in April next year, after which the reward for mining each block will be halved and will decrease from 6.25 to 3.125 units.
Panigirtzaglu says:
The general idea is that the upcoming halving will make the supply of new bitcoins less than before and thus will help the price of this digital currency to grow. This argume does not seem convincing in our opinion, since the Bitcoin halving eve is completely predictable and its effect on the price is already included.
The fifth reason of JP Morgan analysts, and perhaps the most negative of them, is that the factors behind the fall of Bitcoin and digital currencies in the past years are still prese in the market. Cryptocurrency wier began in earnest after the collapse of the Terra Network and UST Stablecoin, and reached another critical poi after the bankruptcy of cryptocurrency exchange FTX. JP Morgan has ideified these crises as negative factors, along with the lack of a clear legal situation, the decrease in the ierest of large investors to eer the market, the decrease in the volume of activities in the Ethereum network, the fall in the market value of stablecoins, and the decrease in the volume of veure capital investmes (on startups in this field). which are still in the market.
Panigirtzaglu said in the end:
All these negative factors are still in place and as a result hinder the further growth of digital currencies. In addition, our analysis shows that investor seime is similar to the era before the FTX bankruptcy or the collapse of the Terra network, and the sum of these impressions makes us cautious about the future of digital currencies.
