A team of JPMorgan strategists predicts that Bitcoin slide 2021 isn’t over.
According to JPMorgan, the bitcoin futures curve is in what the team calls backwardation, which means that the spot price is higher than the future contracts. Futures contracts require the buyer to buy assets at a specified price on a fixed date at some later time.
Strategists are concerned that the last time the spot price was higher than futures was in 2018, when the last bitcoin crash took place. That crash saw cryptocurrencies drop nearly 80%, making it worse than even the bubble burst at the turn of the millennium.
This ostensibly suggests that a bear market may be approaching as there is a lack of investment interest from institutional buyers. JPMorgan’s findings are based on a 21-day average of BTC futures contracts on spot prices. The team stated :
“This is an unusual development and a reflection of how weak bitcoin demand is currently from institutional investors who tend to use regulated CME futures contracts to gain exposure to bitcoin.
The team warned that this may be “a bearish signal that carries some echoes of the December 2017 retail investor driven foam”.
Another issue the team expressed concern was that bitcoin’s share of the global market has dropped in recent months from around 70% in January to nearly 42% today. Panigirtzoglou warned of the decline in bitcoin market share in May, which was followed by a significant drop in valuation.
Regulations causing headaches for cryptoactive investors
One of the likely reasons for the drop in bitcoin’s overall performance is the increase in regulations that governments are putting on cryptocurrencies. It seems almost daily that a new country is announcing plans to expand the rules and regulations regarding the use and marketing of cryptocurrencies.
Last week, the chairman of the US Securities and Exchange Commission, Gary Gensler, called for greater investor protection. Gensler, who previously served as Obama’s head of the Commodity Futures Trading Commission, said cryptocurrencies “raised new investor protection issues that we still need to address.”.
China has also begun to crack down on problems it has with cryptocurrency, specifically bitcoin mining. The nation is trying to take steps to become a greener country and bitcoin mining is not an industry that will help them achieve that goal.
As a result, new regulations began to prohibit cryptoactive mining. This forced many to flee to other places, such as the United States and Kazakhstan, to continue mining. However, it is apparently only a matter of time before the same problems appear in the miners’ new homes and more regulations are proposed.