According to a report by The Block, analysts at JPMorgan indicated in a report released on Wednesday that the cryptocurrency market is facing short-term downside risks due to weakened institutional demand for Bitcoin and Ethereum futures on the Chicago Mercantile Exchange (CME).
Led by Nikolaos Panigirtzoglou, the JPMorgan analysts noted that the recent downward trend in the crypto market has brought CME Bitcoin and Ethereum futures close to a “backwardation” state, where futures prices are lower than spot prices, similar to the situation observed in June and July of last year.
Lack of Positive Catalysts and Diminishing Momentum
The 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 stated 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.
Second, funds that rely on market momentum, such as commodity trading advisors, have been reducing their exposure, further dragging down demand. The analysts noted, “The momentum signals for Bitcoin and Ethereum have been weakening over the past few months, 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.
