JPMorgan: Unless Bitcoin quickly rebounds above $40,000, it may fall further

Source: Cailianshe

Cailian Press (Shanghai, editor Bian Chun) reported that the price of Bitcoin has risen sharply in the past year and hit a record high of nearly $42,000 on January 8, but has since plummeted 11%. JPMorgan Chase pointed out that unless Bitcoin rises above $40,000 soon, it may face the risk of further decline.

JPMorgan strategists including Nikolaos Panigirtzoglou said a massive exit by trend-following investors could hurt bitcoin unless the cryptocurrency can "break through" the $40,000 price level . They said demand for bitcoin futures and the largest cryptocurrency exchange-traded fund, Grayscale Bitcoin Trust, would provide clues about the outlook for bitcoin prices.

" Inflows into the Grayscale Bitcoin Trust would likely need to maintain a rate of $100 million per day over the coming days and weeks for such a price breakout to occur ," JPMorgan strategists wrote in a report released Friday.

Bitcoin could fall back below 50-day moving average

JPMorgan strategists said bitcoin was in a similar situation in late November, only it was testing $20,000. They wrote that $22.9 billion of institutional investment into the Grayscale Trust helped extend the rally in the world’s largest cryptocurrency.

They said that if Bitcoin prices fail to break through $40,000, trend-following traders "will likely fuel past week's pullback" and that "momentum signals will naturally weaken between now and the end of March."

The surge in bitcoin comes amid the coronavirus pandemic, during which governments around the world have rolled out massive stimulus measures to help struggling economies. This has heightened some investors' concerns about inflation and prompted them to turn to assets like bitcoin as a hedge against it.

Commentators believe that investors' pursuit of higher returns in a global low-interest rate environment, the entry of institutional investors and large companies, retail investors' fear of missing out, and the limited supply of Bitcoin are all possible reasons for the four-fold increase in Bitcoin prices over the past year.

The market's views on Bitcoin are deeply polarized. Supporters believe that as the global economy recovers, Bitcoin is becoming more and more mature as a tool to hedge against a weak dollar and accelerating inflation. Others say that Bitcoin's typical characteristics are still speculative prosperity, and the bubble will eventually burst.

As of now, the price of Bitcoin has fallen to $35,800, a 24-hour drop of 2%.