JPMorgan Chase: Bitcoin's May haze has not yet dissipated, and the recent rise is just a flash in the pan

Bitcoin’s recent rebound has yet to restore the confidence that was shattered during May’s crash.

The cryptocurrency has jumped about 14% in two days, trading at $38,295 as of 11:05 a.m. Thursday. While the momentum may have bulls cheering, a team at JPMorgan Chase & Co. said a backslide in one part of the futures market, where spot prices are now above futures prices, is reason for caution.

“We view the return to a backwards trend in recent weeks as a negative sign, pointing toward a bear market,” JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note. Bitcoin’s relatively lackluster share of the total cryptocurrency market capitalization is another worrisome trend, they added.

JPMorgan's analysis, based on a 21-day rolling average of the spread between the second-period bitcoin futures and spot prices, noted that the bitcoin futures curve was in divergence for much of 2018, when the cryptocurrency fell 74% after 2018. The report said this was an "unusual progression that reflects the current rather weak demand for bitcoin among institutional investors," who prefer to trade using futures contracts listed on the Chicago Mercantile Exchange.

According to data from crypto data platform Coingecko, Bitcoin currently accounts for about 42% of the total cryptocurrency market value, down from about 70% at the beginning of the year. For some analysts, this is partly a sign that retail investors' enthusiasm has been dispersed to other currencies.

JPMorgan strategists said in a June 9 report that Bitcoin’s share may need to reach above 50% to convince people that the current bear market is over. Panigirtzoglou previously noted in early May that Bitcoin’s market share was declining before the price of the cryptocurrency fell.

Investors are waiting for the next opportunity to end the volatile range of $30,000-40,000 for Bitcoin, which has been falling since hitting a record of nearly $65,000 in April. Musk's public criticism of Bitcoin's energy needs and the suppression of Chinese regulators are among the huge obstacles. Bitcoin prices got a slight boost on Wednesday after El Salvador made Bitcoin a legal tender.

“We need to see a strong upside move in bitcoin to convince bulls that we are out of this dark period,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note Thursday.