JPMorgan: Crypto Correction Phase Likely Passed, Limited Downside Expected
JPMorgan analysts have indicated that the challenging phase of correction and liquidations in the crypto markets has likely passed. Here are the key points:
– Unwinding of long positions: The analysis of CME bitcoin futures positions suggests that the unwinding of long positions is nearing completion rather than being in its initial stages. This indicates limited downside for crypto markets in the near term.
– Positive news and long positions: Crypto traders had built long positions based on positive news, such as the XRP ruling, PayPal’s stablecoin launch, and anticipation of spot bitcoin ETF approvals. Traders also positioned themselves ahead of the upcoming bitcoin halving event.
– Fading positive news and liquidations: As positive news faded, the SEC delayed its decision on spot bitcoin ETF approvals, the XRP ruling faced an appeal, and Congress debated regulations on stablecoins. This led to a wave of long position liquidations, but the unwinding phase seems to be coming to an end.
– Broader market correction: The correction in crypto markets mirrored a broader correction in risk assets like equities and tech stocks. This correction was influenced by frothy positioning in tech, higher U.S. real yields, growth concerns about China, and news of SpaceX liquidating its bitcoin holdings.
– Bitcoin price and future outlook: Bitcoin is currently trading around $26,000. Pantera Capital predicts that the bitcoin price could reach $148,000 after the halving event next year.
Hot Take: Limited Downside for Crypto Markets in Near Term
According to JPMorgan analysts, the recent correction and liquidations in the crypto markets have likely passed their challenging phase. With the unwinding of long positions nearing completion, there is limited downside expected in the near term. Positive news had driven traders to build long positions, but as the news faded, liquidations occurred. However, the unwinding phase appears to be ending rather than starting. The correction in crypto markets aligned with a broader correction in risk assets, and SpaceX’s bitcoin liquidation news acted as an additional catalyst. Currently, bitcoin is trading at around $26,000, and there are optimistic predictions of reaching $148,000 after the halving event.
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