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JPMorgan questions the sustainability of strong cryptocurrency inflows
Tevarak
JPMorgan has expressed uncertainty about the sustainability of robust net inflows into cryptocurrencies so far this year.
Year-to-date net cryptocurrency inflows of $12 billion – which could grow to $26 billion by the end of 2024 if flows continue at the same pace – were largely driven by the allure of spot bitcoin (BTC-USD) exchange-traded funds, analyst Nikolaos Panigirtzoglou wrote in a recent note.
Such bitcoin-holding products have attracted $16 billion in net inflows since their inception, the note said. Added ECM (ECM) of futures flows and capital raised by cryptocurrency venture capital funds, total cryptocurrency inflows have reached $25 billion year-to-date.
While this is an impressive number, Panigirtzoglou flagged that it may not fully represent new money entering the crypto space. “We believe there has likely been a significant rotation from digital wallets on exchanges to the new spot Bitcoin ETFs,” she explained.
This change is evident, he noted, since bitcoin (BTC-USD) reserves on exchanges have decreased by 220,000 BTC, or $13 billion, since the ETFs launched in January. “This implies that the majority of the $16 billion inflows into spot bitcoin ETFs since launch likely reflects a rotation from existing digital wallets on exchanges.”
He attributed the rotation to “the cost-effectiveness, greater liquidity, regulatory protection and convenience of the ETF wrapper that has become market participants’ preferred tool for bitcoin exposure for both existing and existing cryptocurrency investors. for the new ones.”
Overall, the analyst is skeptical that cryptocurrency inflows will continue at the same pace for the rest of the year, given the high price of bitcoin (BTC-USD) is relative to the cost to produce one or compared to gold.
In fact, bitcoins (BTC-USD) the price has risen sharply this year, jumping about 51%, after reaching an all-time high of more than $73,000 in March. Since reaching its peak, the token has consolidated in the trading range between $59,000 and $71,000 as investors look for potential catalysts. BTC changed hands at $65.4K in Friday afternoon trading.
Most Seeking Alpha analysts are bullish on bitcoin (BTC-USD). However, JH Research believes that “little and declining media attention and interest in Bitcoin far outweighs the effects of “several” events on the horizon that could cause marginal growth in demand.”
The SA contributor noted that searches and price increases have a strong historical relationship. “Significant rallies have only occurred in conjunction with increased attention and interest, something that is not currently present.”