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Saturday, November 27, 2021

JPMorgan analyst: Bitcoin faces a bear market

After a rapid rally at the beginning of the year, it has recently become clear again that the price development for Bitcoin is not a one-way street. Prices have recently corrected sharply and a JPMorgan analyst even assumes that a bear market could be imminent for Bitcoin.

• Bitcoin on the downside since May
• JPMorgan analysts warn of a bear market for Bitcoin
• Bitcoin’s market share significantly weaker than at the beginning of the year

Bitcoin price since the beginning of the year

In the first quarter of 2021, Bitcoin saw a steep upward trend. Since the beginning of the year, the Bitcoin price has more than doubled and reached a new all-time high in April at US $ 64,902.20. In May, some bad news followed: Tesla canceled payment via Bitcoin, Elon Musk brought the high energy consumption of Bitcoin back into the focus of investors and the central banks in China and Japan criticized the cyber currency. As a result, the Bitcoin rate corrected over 50 percent to below 30,000 US dollars. Bitcoin was recently able to make up some ground again. According to the latest tweet from Elon Musk, Tesla could pay with Bitcoinre-imagine what drove the Bitcoin course under more environmentally friendly conditions. Bitcoin is currently at $ 38,635 (as of June 16, 2021), which is still well below the record high from April. According to analysts at JPMorgan , after the price slide in May, it even looks like Bitcoin could face a bear market.

Is Bitcoin facing a bear market?

A team of JPMorgan analysts, led by Nikolaos Panigirtzoglou, sees bitcoin heading for a bear market despite the recent bull market, according to Bloomberg’s Eric Lam and Joanna Ossinger. The price development of Bitcoin shows a backwardation, which means that the spot price of Bitcoin is currently higher than the prices on the futures market. This is an unusual development and could indicate a bear market. It also shows how weak demand from large, institutional investors isbecause they often invested via futures contracts, says Nikolas Kessler from the shareholder. Thus, futures contracts are usually quoted above the current Bitcoin price, which suggests a positive assessment on the part of large investors. Since exactly the opposite is currently the case, the JPMorgan analysts see a negative signal, which could indicate a continuing downward trend in Bitcoin. The phenomenon was last seen with Bitcoin in 2018, whereupon the cyber currency collapsed by about 75 percent after rallying strongly in 2017. The market share of Bitcoin in relation to the total crypto market value is currently around 42 percent, according to Bloomberg, at the beginning of the year it was more than 70 percent. The proportion must at least exceed 50 percent, to dispel the bear market scenario, according to JPMorgan analysts. Already at the beginning of May, before the correction of the Bitcoin rate, Panigirtzoglou pointed to the falling market share with concerns and was at least right in this case.

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What’s next for Bitcoin?

It is clear that Bitcoin has not had it easy recently, but investors should not forget that cryptocurrencies and Bitcoin in particular are a highly volatile asset class. Just as quickly as the Bitcoin rises in a few days, it can also give up the profits again. Whether the JPMorgan analysts are right and Bitcoin could head for a bear market or whether Bitcoin can break out of the current sideways range upwards could decide on the further course of events. Should Bitcoin stabilize again, then the situation on the futures market should change again and the bearish signal should subside again. It remains to be seen how the price development of Bitcoin will continue for the time being.

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