JPMorgan Analysts Question Longevity of Crypto Market Recovery
According to JPMorgan analysts, the recent rebound in cryptocurrency prices should be viewed as tactical rather than the start of a lasting upward trend. The analysts cast doubt on the sustainability of the current crypto market recovery, suggesting that the surge in prices may be temporary.
Bitcoin’s Current Price vs. Production Cost
In a report released on Thursday, the analysts highlighted the disparity between Bitcoin’s current price of approximately $67,500 and its production cost of around $43,000. This significant difference suggests a potential for a mean reversion around the zero line, limiting the potential for significant upside in Bitcoin prices over the long term.
Bitcoin’s Volatility-Adjusted Value to Gold
They also compared Bitcoin’s volatility-adjusted value to gold, indicating a value of around $53,000. This comparison further supports the analysts’ view that the current price surge may not be sustainable.
Impact of Market Liquidations
The analysts noted that current liquidations in the crypto market, including those by Gemini, Mt. Gox creditors, and the German government’s sale of seized Bitcoins, have contributed to the recent weakness in Bitcoin futures. However, they anticipate a decrease in liquidations after July, leading to a rebound in Bitcoin futures from August. This projection aligns with the observed increase in gold futures.
Potential Impact of Trump’s Re-Election
Interestingly, JPMorgan analysts also suggested that both Bitcoin and gold could benefit from the potential re-election of former President Donald Trump. They explained that some investors perceive Trump as more favorable towards crypto companies and regulations compared to the current Biden administration. Furthermore, Trump’s potential trade policies could prompt emerging market central banks, particularly China’s central bank, to diversify their holdings by increasing their investments in gold.
Bitcoin Wallet Addresses and Market Metrics
As reported, the number of Bitcoin wallet addresses holding BTC has been decreasing over the past month, according to data from on-chain analytics firm Santiment. While this may initially seem concerning, Santiment suggests that it could actually be good news for investors.
“When we see mass liquidations like this, the probability of a continued rebound only increases”, the firm wrote. Meanwhile, there has also been a decline in the percentage of Bitcoin supply in profit, currently standing at 89.43% according to Glassnode data. While this might appear discouraging, other metrics paint a more bullish picture.
Institutional Accumulation and Market Trends
In a recent post, CryptoQuant founder Ki Young Ju noted that over-the-counter (OTC) markets are dominating centralized exchange markets, indicating institutional accumulation. Large whale wallets, including spot ETFs and custodial wallets, have acquired 1.45 million BTC this year, totaling approximately 9% of the circulating supply. The weekly inflow to these whale entities has surpassed the total for the entire year of 2021, with an impressive 100,000 BTC flowing in each week.
Despite a decline in trading volume on centralized crypto exchanges for the third consecutive month, Bitcoin spot markets have experienced a recovery, gaining 12% over the past seven days.
