J.P. Morgan Analysts Foreshadow Further Bitcoin Declines

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In Brief
  • Analysts with JP Morgan cite regulatory concerns and profit-taking for the recent selloff.

  • They also said there is room for further downward moves driven by momentum traders.

  • The analysts stated that Grayscale would play a prominent role in bitcoin's continued rise or fall.

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Bitcoin’s recent price drop has wiped away some speculative “froth” but further downtrends remain possible, according to analysts at JPMorgan Chase.

For context, the bitcoin (BTC) price started off last week with a significant increase, arriving at a new yearly high of $19,500 before suffering a sharp (almost 14%) drop on Nov. 26.

The decline coincided with Black Friday, as BTC/USD fell at roughly the same time as the famous discount shopping day, leading many to note the comparison.

According to an article in Bloomberg, the primary causes of the slump were profit-taking, concern about new regulations, and the unwinding of Bitcoin futures. Since then, the price has recovered from the mini-crash and has been moving upwards again.

Per BeInCrypto analysis, the increase is likely a retracement rather than the beginning of a new upward trend.

Although bitcoin has bounced back from precipitous price losses during the Thanksgiving holiday, analysts from JPMorgan Chase also forecasted further declines.

As cited in Bloomberg, Nikolaos Panigirtzoglou, Managing Director at J.P. Morgan, said, “momentum traders have room to further propagate” [a bitcoin price decline].

The Importance of Grayscale

Panigirtzoglou also highlighted Grayscale, and its sizable Bitcoin Trust, as playing a central role in future BTC price developments.

The cryptocurrency asset management company has long been important because it’s said to be favored by institutional investors wanting to get exposure to bitcoin (and other digital assets).

Grayscale has added significantly to its crypto holdings since the start of 2020. After an eleven months filled with ever higher prices, as of November 27, Grayscale’s assets under management (AUM) have risen to yet another all-time high.

The interest (or lack thereof) towards the Grayscale bitcoin trust in the coming months will be a key signal as to whether there indeed is strong institutional interest in BTC.

As the JPM analysts put it,

“a failure by the Grayscale Bitcoin Trust to receive additional inflows over the coming weeks would also cast doubt to the idea that institutional investors such as family offices have embarked on a trend of embracing Bitcoin as digital gold replacing traditional gold as a long-term investment.”

While this may be true, bitcoin is still up more than 150% on the year. Many Bitcoin advocates will feel vindicated by this and point to the need for additional inflation hedge assets during the pandemic as fuel for further gains.

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Colin is a writer, researcher, and content marketer with a keen interest in the future of money. His writing has been featured in numerous cryptocurrency publications, and his holdings don't amount to more than a handful of BAT.

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