Warning of Downside Risks in the Cryptocurrency Market

Jafar224

Global investment banking giant JPMorgan Chase has released a report, sparking concerns about the cryptocurrency market.

JPMorgan analysts, including the bank's managing director and global market strategist Nikolaos Panigirtzoglou, pointed out that various alternative indicators of venture capital (VC) flows into cryptocurrencies so far this year (YTD) "look rather subdued" compared to previous years. They explained:

"We had previously argued that a resurgence in cryptocurrency venture capital flows was a necessary condition for the cryptocurrency market to sustain its recovery, so in our opinion, the subdued venture capital flows year-to-date represent downside risk."

The analysts detailed that despite the slow recovery in venture capital funds, cryptocurrency hedge funds have become a more dynamic force this year. They added that assets under their management have surged significantly over the past six months, estimated to reach $20 billion.

In March, JPMorgan analysts stated that despite recent corrections, Bitcoin still appears to be overbought. Panigirtzoglou also mentioned, "It is unrealistic to expect the nominal amount of Bitcoin in investor portfolios to match that of gold."

Additionally, JPMorgan analysts continue to temper enthusiasm for the approval of a spot Ethereum exchange-traded fund (ETF) in May. Their latest report reiterated their skeptical view, suggesting the likelihood of approval is not higher than 50%. "Following the SEC investigation into the Ethereum Foundation, the market's optimism for the approval of the spot Ethereum ETF on May 23 also seems to be fading, as the Grayscale Ethereum Trust NAV discount has widened from 8 to this point. Increased by 22% in the past month," they described.

There are also reports that the U.S. Securities and Exchange Commission (SEC) may attempt to classify Ether as a security. SEC Chairman Gary Gensler has not yet clarified the classification of ETH. Recently, 48 U.S. lawmakers wrote to him urging the SEC chairman to clarify whether ETH is a security or a commodity.

Nevertheless, JPMorgan analysts remain optimistic about the long-term outlook, believing that the SEC will eventually approve a spot Ethereum ETF. They compared it to Grayscale Investments' efforts to convert its Bitcoin Investment Trust fund (GBTC) into a spot ETF, expecting a similar scenario and possibly triggering litigation, paving the way for the SEC to eventually approve a spot Ethereum ETF.

Iti9

The warning needs to be taken seriously now.

Yamini003

The risk is still very significant.