J.P. Morgan cautious on crypto with retreat by retail investors, dearth of upside drivers

Retail investors selling off cryptocurrencies alongside other headwinds is keeping J.P. Morgan cautious toward the market.

Bitcoin (BTC-USD) finished sharply lower in April, sinking 15% for the first monthly loss since August 2023. It traded close to $59,000 on Thursday, much lower than its all-time high above $73,000 in March.

“The past two weeks saw significant selling/profit taking with perhaps retail investors playing a bigger role than institutional investors,” strategists led by Nikolaos Panigirtzoglou wrote in a Thursday note. Spot bitcoin ETFs logged outflows in April and retail investors appeared to have sold both crypto and equity assets during last month’s trade, the firm said.

Panigirtzoglou also said the market is facing a trio of headwinds consisting of elevated positioning, high bitcoin prices compared with gold as well as estimated bitcoin production costs, and subdued crypto funding by venture capitalists.

“In all, with a lack of positive catalysts, with the retail impulse dissipating and with the three headwinds mentioned … still in place, we maintain a cautious stance on crypto markets over the near term,” Panigirtzoglou said.

In terms of institutional investors, J.P. Morgan said it’s mostly momentum traders such as Commodity Trading Advisors or other quantitative funds taking profit on previous extreme long positions in bitcoin as well as in gold.

Some bitcoin ETFs to watch are Grayscale Bitcoin Trust (GBTC), BlackRock’s iShares Bitcoin Trust (IBIT) and Grayscale Bitcoin Trust (GBTC).