JPMorgan analysts say the recent spike in crypto prices appears to be driven by impulsive decisions by individual traders rather than by institutional investors or market fundamentals.
“Similar to equities, we saw a rebound in retail impulse for cryptocurrencies in February, which has led to stronger crypto markets this month,” JPMorgan analysts led by Nikolaos Panigirtzoglou said in a note Thursday. “This is likely to be the cause of the strong rise.”
The GMCI 30 index, which measures the performance of the top 30 cryptocurrencies, is up more than 13% year-to-date.
retail impulse
Analysts say retail impulses are evident by analyzing cumulative on-chain Bitcoin flows, distinguishing between small and large wallets, and adjusting inflows to new spot Bitcoin exchange-traded funds. Stated. “This adjustment is necessary because the Bitcoin holdings of retail investors who migrated to the new Spot Bitcoin ETF are technically held in larger institutional wallets, even if the end investor is an individual. ” they added.
Another indicator of retailer interest in cryptocurrencies is the growing popularity of AI and meme tokens, analysts said. It added that the share of AI and meme tokens in the total crypto market capitalization recovered in February.
Individual interest in cryptocurrencies also surged toward the end of last year, mirroring the momentum seen in the stock market in the fourth quarter of 2023, analysts said. The surge is supported by quarterly reports from traditional brokerages that provide crypto trading and custody services to retail clients, including Block, PayPal and Robinhood, they said. These platforms saw an increase in trading activity and investor flows in the fourth quarter, and crypto exchanges like Coinbase similarly saw an increase in retail investor trading activity over the same period, the analysts added. .
3 main catalysts
The recent retail impulse can be attributed to three major upcoming crypto catalysts, namely the Bitcoin halving event, the upcoming major upgrade of the Ethereum network called Dencun, and the U.S. A spot Ethereum ETF may be on the way to approval, analysts said.
However, while the first two catalysts are “mostly priced in,” analysts reiterated that there is only a 50% chance of an Ethereum ETF being approved in May.
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