Crypto Markets To Face Downturn as Demand Drops for CME Bitcoin and Ether Futures: JP Morgan
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JPMorgan analysts warn that the crypto markets could face a downturn soon, as institutional demand for CME bitcoin and ether futures has dropped.
Crypto Market Drops 15%
The crypto market has dropped 15% from its peak of $3.72 trillion on December 17 to about $3.17 trillion, signaling a big correction. JPMorgan analysts note that this decline has brought CME bitcoin and ether futures close to “backwardation,” where future prices are lower than spot prices, similar to what happened last June and July.
The analysts pointed out that this is a troubling sign, showing that institutional investors using regulated CME futures to invest in bitcoin and ether are showing weaker demand. This shift suggests less confidence from major players in the market.
The analysts explained that when demand for bitcoin and ether futures is strong, they usually trade at a premium to spot prices, called “contango.” This premium, often over 10% a year, is driven by the high “risk-free” rate in crypto, where lending USD can earn 5%-10% annually. However, when demand drops and expectations for prices weaken, futures can fall below spot prices.
The Lack of positive catalysts
The analysts note that the drop in demand for CME bitcoin and ether futures is likely due to two main reasons. First, some institutional investors are cashing out because there aren’t any immediate positive triggers. They also noted that big crypto moves from the new U.S. administration probably won’t happen until later in the year, so investors are holding off for now.
Secondly, funds that follow market trends, like commodity trading advisors, have been pulling back, which is also hurting demand. The analysts pointed out that both bitcoin and ethereum have been losing momentum, with ethereum’s momentum turning negative. Because of this, they warn that crypto markets could keep facing challenges in the near term.
Bitcoin ETF Demand Slows Down
In a recent X post, Cryptoquant CEO Kim Young Ju noted that while Bitcoin ETF demand has slowed, it remains net positive. He added that this bull cycle will continue until significant ETF outflows occur. Prolonged net negative demand would signal the start of a bear cycle. “Demand and supply are all that matter; everything else is just noise,” he said.
The current slowdown in Bitcoin ETF demand, while still positive, has important implications. Ki Young Ju suggests that the ongoing positive demand could keep the bull market going. However, traders should watch for signs of large ETF outflows, which might indicate a shift toward a bear market.
Nevertheless, the Bitcoin proponents continue to advocate for Bitcoin. Recently, Kiyosaki has urged everyone to start saving Bitcoin, gold, and silver, calling them “real money.” He believes these assets can make people wealthier in the future as their prices rise. Last year, he tweeted that Bitcoin and these precious metals are key to financial success in the long run. Kiyosaki stresses that investing in Bitcoin, gold, and silver could be the answer to building future wealth.
