Is the crypto rally overachieving? Insights from JPMorgan

In a period that has seen many cryptocurrencies achieving positive results, many investors have started thinking again about this digital currency, wondering whether or not to invest.

Not everyone shares an optimistic outlook on recent events, with JPMorgan analysts casting doubt on the sustainability of the current crypto market surge, suggesting that the “crypto rally appears excessive.”

They pointed to two main factors driving the recent crypto rally. Firstly, anticipating a spot Bitcoin ETF approval in the U.S. could inject fresh funds into the cryptocurrency market. 

The analysts, led by Nikolaos Panigirtzoglou, mentioned in their report on Wednesday, November 8, that such approval might be viewed as a win for the crypto industry and a setback for the Securities and Exchange Commission (SEC). This could result in a more lenient SEC stance in the future. However, the analysts expressed skepticism regarding both of these factors or arguments.

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Moreover, they emphasized that spot BTC ETFs are already operational in Canada and Europe but have attracted minimal attention from investors since their inception. Consequently, they maintain skepticism regarding the influx of new capital into the recently approved spot Bitcoin ETFs in the U.S.

Main arguments for a negative outlook

The second primary catalyst behind the current crypto surge stems from the SEC’s defeats in the legal battles with Ripple and Grayscale. However, despite these setbacks, JPMorgan analysts express uncertainty about the potential relaxation of crypto regulations in the future.

“It is far from clear that the regulatory tightening of the crypto industry will lessen significantly going forward given how unregulated this industry is,” the analysts said. “U.S. crypto industry regulations are still pending, and we do not believe U.S. lawmakers would shift their stance because of the above two legal cases, especially with the memories from the FTX fraud still fresh.”

Another factor fueling optimism for the future of crypto markets is the impending Bitcoin halving event scheduled for the spring of 2024. This event might increase the BTC price, decreasing the supply of new coins. Yet, as per the JPMorgan analysts, the impact of the halving event is already factored into the current pricing.

In general, the analysts approach the crypto markets’ future cautiously, foreseeing a significant likelihood of a ‘buy the rumor/sell the fact’ effect after the anticipated SEC approval of spot Bitcoin ETFs.

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