Cryptocurrency Market Update

The cryptocurrency market is currently lacking positive catalysts, according to a report by Wall Street bank JPMorgan (JPM) published on Wednesday.

Recent corrections in crypto markets have led both Bitcoin (BTC) and Ether (ETH) futures to approach backwardation, indicating lower demand. Backwardation occurs when the spot price of an asset exceeds the trading price in the futures market.

According to analysts led by Nikolaos Panigirtzoglou, this situation suggests a weakness in demand from institutional investors utilizing regulated CME futures contracts for exposure to these cryptocurrencies.

In a healthy demand scenario, futures prices tend to be higher than spot prices, indicating contango. However, as demand decays and price expectations decline, the futures curve shifts toward backwardation.

The report notes several potential reasons for this decline in demand:
– Positive crypto initiatives from the new Trump administration are expected to roll out in the second half of the year, leading to profit-taking among institutional investors amid the absence of short-term catalysts.
– Additionally, lowered demand from systematic and momentum-driven funds, such as Commodity Trading Advisors (CTAs), has further impacted Bitcoin and Ether futures.

Read more: U.S. Crypto Task Force to Focus on Delivering National Bitcoin Reserve: Bernstein