JPMorgan is cautious on crypto as retail investors dump following ETF hype

Published Thu, May 2 20243:01 PM EDTUpdated Thu, May 2 20245:03 PM EDT

Retail dollars flowed out of bitcoin ETFs in April, and JPMorgan encourages investors to adopt a cautious stance on the cryptocurrency for now. The firm previously predicted the widely anticipated Bitcoin halving had been priced in ahead of the April 19 event and that there would be some downside pressure in the weeks after it was complete. The analysts cited overbought conditions, high price versus gold, and low activity in venture capital funding. It's fallen 6% since, according to Coin Metrics. "The past two weeks saw significant selling/profit taking with perhaps retail investors playing a bigger role than institutional investors," JPMorgan's Nikolaos Panigirtzoglou said in a note Thursday. "Indeed, not only have spot bitcoin ETFs seen outflows in April but our proxies of the retail impulse into equities have also downshifted over the past month." "With a lack of positive catalysts, with the retail impulse dissipating and with the three headwinds mentioned previously … still in place, we maintain a cautious stance on crypto markets over the near term," Panigirtzoglou said. Technical analysts also said bitcoin could slide to about $50,000 after the cryptocurrency fell below the key $60,000 support level on Wednesday, but added that the long-term uptrend remains intact. Investors and analysts often point out that price action around the halving tends to be unremarkable — a headline event, but not something that affects the price of bitcoin in the near term. BTC.CM= 1M mountain Bitcoin (BTC) over the past month In the two weeks leading up to the conclusion of the Federal Reserve's Wednesday meeting, cryptocurrencies had also been pressured by macro uncertainties around inflation. The central bank ultimately kept rates unchanged. Panigirtzoglou noted that in addition to crypto, retail investors also sold equities in April and that the impulse into stocks has also shifted down. "This is shown by … the net flow into equity funds including ETFs and mutual funds, typically used by retail investors … [which] turned negative in April after strong buying in February and March," he said.