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Difference In BTC Spot and Future Prices Signals Bear Market- JPMorgan

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JPMorgan’s cryptocurrency market analysts have pointed to the difference between Bitcoin’s (BTC) spot prices and BTC futures prices as a potential bearish sign for the market.

In a Thursday note to clients, JPMorgan analysts led by global market strategist Nikolaos Panigirtzoglou wrote that the Bitcoin market has returned to backwardation — a situation when the spot price is above futures prices. The analysts said that the past month’s correction in crypto markets saw Bitcoin futures reversing into backwardation for the first time since 2018.

According to the strategists, Bitcoin futures backwardation should be viewed as a negative sign for BTC price despite a major rebound on the market over the past two days, with Bitcoin hitting $37,500 on Thursday. The analysts stressed that the Bitcoin futures curve was in backwardation for most of 2018, a year when Bitcoin dropped 74 percent after hitting its then-historic high of $20,000 in late 2017:

“We believe that the return to backwardation in recent weeks has been a negative signal pointing to a bear market. […] In our opinion the shift in Bitcoin futures into backwardation is a bearish signal echoing 2018.”

In the latest analysis, JPMorgan specifically looked at a 21-day moving average of the second Bitcoin futures spread over spot prices. The analysts observed an “unusual development and a reflection of how weak Bitcoin demand is at the moment from institutional investors” who trade futures contracts on the Chicago Mercantile Exchange.

The analysts also noted that Bitcoin’s weakened share in the total crypto market value is another concerning trend. As previously reported by Cointelegraph, Bitcoin dominance on crypto markets tanked to 40 percent in late May, marking the lowest share over the past three years after surging above 70 percent this January.

At the time of writing, Bitcoin’s share in the total crypto market capitalization is 43 percent, accounting for $682 billion out of the total crypto market value of $1.6 trillion, according to data from CoinMarketCap. Some analysts like crypto index provider Stack Funds believe that BTC dominance could retest its previous highs in the short term.

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Bitcoin Eyes Gains with Seasonal July Boost After Slump

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After several months of declines and rangebound trading, Bitcoin (BTC) bulls have reason to cheer as the largest cryptocurrency is poised for a potential seasonal upswing this July.

Historical data and recent market movements suggest a positive outlook for Bitcoin, following a period marked by billions in sales, upcoming selling pressure, and outflows from exchange-traded funds (ETFs).

Since April, Bitcoin has been trading within a narrow band of $59,000 to $74,000, weighed down by market dynamics and peak negative sentiment among retail traders.

However, July has historically been a bullish month for Bitcoin, and early indicators show a possible reversal of recent trends.

On the first day of July, U.S.-listed ETFs recorded nearly $130 million in inflows, their highest since early June.

This influx comes after a significant $900 million outflow in the previous month, signaling renewed investor confidence in the cryptocurrency.

“Bitcoin has a median return of 9.6% in July and tends to bounce back strongly, especially after a negative June,” said Singapore-based QCP Capital in a recent Telegram broadcast.

“Our options desk saw flows positioning for an upside move last Friday into the month-end, possibly in anticipation of the ETH spot ETF launch. Many signs point to a bullish July.”

Historical data supports this optimistic outlook. Over the past decade, Bitcoin has gained an average of more than 11% in July, with positive returns in seven out of the ten months.

A 2023 report by crypto fund Matrixport highlighted significant July returns in recent years, with gains of around 27% in 2019, 20% in 2020, and 24% in 2021.

Seasonality, the tendency of assets to experience regular and predictable changes that recur annually, appears to be a driving factor.

These seasonal cycles can be influenced by various factors, such as profit-taking around tax season in April and May, leading to drawdowns, and the generally bullish “Santa Claus” rally in December, which reflects increased demand.

As the cryptocurrency market enters July, Bitcoin traders and investors are optimistic about a potential rally. While the market remains cautious of underlying pressures, the historical trends and recent inflows suggest a favorable environment for Bitcoin’s resurgence.

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Bitcoin Slumps 13% in Q2, Prompting Investor Concerns

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As the second quarter of 2024 concludes, cryptocurrency investors are left contemplating the future of Bitcoin after the leading digital currency retreated significantly from its all-time highs.

Bitcoin, which had previously soared to a record $73,798 in mid-March, has seen a sharp decline, closing the quarter at approximately $61,000.

This represents a 13% drop since March, a stark contrast to the substantial gains of 67% and 57% in the previous two quarters, respectively.

The downturn has spurred concerns among investors about the broader implications for risk appetite in financial markets, particularly as the prospect of higher-for-longer interest rates looms.

This sentiment was echoed by Austin Reid, Global Head of Revenue and Business at FalconX, who noted, “A lot of people in the market have questions that are mostly anchored on concerns from a macro perspective. I think there’s just some short-term uncertainty being reflected within the crypto market, as we’re seeing in some other asset classes too.”

One of the clearest indicators of waning interest in Bitcoin is the significant slowdown in demand for U.S. exchange-traded funds (ETFs) that hold the cryptocurrency. These funds, approved by the Securities and Exchange Commission in January, saw a flood of interest initially.

However, the second quarter saw inflows of just $2.6 billion into Bitcoin funds, a sharp decline from the $13 billion recorded in the first quarter, according to data from CoinShares.

“There was a lot of euphoria around the release of the ETFs, and then there was a natural price correction after the rally,” said Matthew O’Neill, Co-Director of Research at Financial Technology Partners.

He explained that the ETFs initially attracted professional investors who wanted Bitcoin exposure but preferred to do so through institutional means.

The reduced inflows into Bitcoin ETFs may reflect a broader hesitation among investors to re-enter the market amid current uncertainties. For those who haven’t yet bought into the ETFs, O’Neill suggests they might be waiting for the next upward price move before committing.

Despite the current downturn, the longer-term outlook for Bitcoin remains a topic of debate. While some analysts see the recent price correction as a temporary setback in an overall bullish trend, others warn that the cryptocurrency market could face more significant challenges ahead, particularly if macroeconomic conditions remain unstable.

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Bitcoin Slumps to One-Month Low as Crypto Market Loses Steam

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The cryptocurrency market is facing a turbulent period, marked by significant declines and waning investor confidence.

Bitcoin, the leading digital asset, has dropped to a one-month low, trading at approximately $62,275 as of Monday morning in London.

This decline is part of a broader downturn in the crypto market, which has seen its second-worst weekly performance of 2024.

The overall gauge of the largest 100 digital assets fell by about 5% over the past week, according to data compiled by Bloomberg.

This represents the worst decline since April and highlights the growing concerns among investors regarding the future of digital currencies.

A key factor contributing to this downturn is the cooling demand for Bitcoin exchange-traded funds (ETFs).

Over the past six days, U.S. Bitcoin ETFs have experienced a consistent outflow of funds, undermining the confidence of investors who were hoping for a steady influx of capital into these investment vehicles.

This has compounded the already existing uncertainties surrounding the cryptocurrency market.

Adding to the market’s woes is the prevailing uncertainty over the Federal Reserve’s monetary policy.

Speculation about the Fed’s ability to cut interest rates from their current two-decade high has created a cloud of doubt over the entire financial market, including cryptocurrencies.

Analysts suggest that this uncertainty is dampening broader risk appetite, with investors becoming increasingly cautious about their investments in volatile assets like Bitcoin.

David Lawant, the head of research at FalconX, noted that the current crypto market dynamic is “characterized by low volatility, soft volumes, and order books getting unbalanced when prices start to move to the edges of their range.”

This imbalance has made the market more susceptible to sharp declines, as seen in the recent slump.

The declines in other major cryptocurrencies are also noteworthy. Ether and Solana have experienced their longest streaks of weekly declines since last year and 2022, respectively.

This comes despite preparations by fund companies to launch the first U.S. ETFs that invest directly in Ether, the second-ranked crypto asset. Solana, once a favorite among digital-asset hedge funds, has also seen significant drops.

Bitcoin, which hit a record high of $73,798 in March, is now trailing behind traditional assets such as stocks, bonds, and gold this quarter.

Analysts are now focusing on the 200-day moving average, currently at around $57,500, as a potential zone of support for Bitcoin’s price.

Tony Sycamore, a market analyst at IG Australia Pty, suggests that this level could provide some stability in the coming weeks.

As the cryptocurrency market navigates through these challenges, investors and analysts alike are keeping a close watch on any developments that could influence the market’s direction.

For now, the sentiment remains cautious, with many waiting to see if the recent declines will continue or if a recovery is on the horizon.

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