According to a report from The Block, analysts at JPMorgan stated in a report released on Wednesday that the cryptocurrency market faces short-term downward risks due to weakened institutional demand for Bitcoin and Ethereum futures on the Chicago Mercantile Exchange (CME).
The analysts, led by Nikolaos Panigirtzoglou, pointed out that the recent downward trend in the crypto market has brought CME Bitcoin and Ethereum futures close to a state of “backwardation,” where futures prices are lower than spot prices, similar to the situation seen in June and July of last year.
Lack of Positive Catalysts and Declining Momentum
JPMorgan analysts attributed the weakened demand for CME Bitcoin and Ethereum futures to two main factors. First, some institutional investors appear to be taking profits due to a lack of immediate positive catalysts. The analysts noted that significant cryptocurrency-related policies from the new U.S. government may not be introduced until the second half of this year, leading investors to adopt a wait-and-see attitude.
Secondly, funds that rely on market momentum, such as commodity trading advisor funds, have been reducing their exposure, further dragging down demand. The analysts stated, “Over the past few months, momentum signals for Bitcoin and Ethereum have been weakening, with Ethereum’s momentum signals having turned negative.”
In light of these trends, the analysts warned that the cryptocurrency market may continue to face pressure in the near term.