Bitcoin
JPMorgan casts doubt on the sustainability of strong cryptocurrency flows
Tevarak
JPMorgan expressed uncertainty about the sustainability of robust net flows into cryptocurrencies so far this year.
Year-to-date net crypto inflows of $12 billion – which could grow to $26 billion by the end of 2024 if flows continue at the same pace – were largely driven by the allure of spot bitcoin (BTC-USD) exchange-traded funds, analyst Nikolaos Panigirtzoglou wrote in a recent note.
These bitcoin holding products have attracted $16 billion in net inflows since inception, the note said. Adding CME (CME) futures flows and capital raised by crypto venture capital funds, total crypto flows have reached $25 billion year-to-date.
While an impressive number, Panigirtzoglou signaled that it may not fully represent the influx of new money into the crypto space. “We believe there has likely been a significant rotation from digital wallets on exchanges to new spot bitcoin ETFs,” he explained.
This change is noticeable, he noted, as bitcoin (BTC-USD) reserves on exchanges have fallen by 220 thousand BTC, or $13 billion, since the launch of ETFs in January. “This implies that the majority of the $16 billion inflows into spot bitcoin ETFs since launch likely reflect a rotation away from existing digital wallets on exchanges.”
He attributed the rotation to “cost effectiveness, deeper liquidity, regulatory protection and the convenience of the ETF wrapper that has become the preferred choice of market participants as an instrument for bitcoin exposure for existing and new crypto investors.”
All in all, the analyst is skeptical that crypto flows will continue at the same pace throughout the rest of the year, given how high the price of bitcoin is (BTC-USD) is relative to the cost of producing a or relative to gold.
In fact, bitcoin (BTC-USD) the price has risen sharply this year, jumping around 51%, having reached an all-time high of more than US$73,000 in March. Since reaching its peak, the token has been consolidating in the $59,000 to $71,000 trading range as investors look for potential catalysts. BTC changed hands at $65,400 in afternoon trading on Friday.
Most Seeking Alpha analysts are optimistic in bitcoin (BTC-USD). However, JH Research considers that “weak and decreasing attention and the decline of media interest in Bitcoin far outweighs the effects of “several” events on the horizon that are likely to cause marginal demand growth.”
The SA contributor noted that research and price increases have a strong historical relationship. “Significant rallies have only occurred in conjunction with increased attention and interest, something that is not currently present.”