The downtrend in the cryptocurrency market appears to be nearing its end, according to recent research by JPMorgan. The American bank’s analysts estimate that the majority of long-position liquidations have already taken place. This prediction is based on the open interest in Bitcoin futures contracts on the Chicago Mercantile Exchange (CME), which suggests that the selling trend could soon slow down. Open interest refers to the number of active futures contracts and serves as an indicator of market sentiment and price trends. If Bitcoin’s open interest declines, it is seen as a sign that the current price trend may be weakening.
Crypto prices have been on a downtrend in recent weeks, largely due to declining optimism surrounding regulatory developments in the United States. As of August 26, Bitcoin is trading close to $26,000, marking an 11.27% decrease over the past 30 days.
However, positive developments in previous months have boosted Bitcoin’s price. One significant factor is a series of applications for the first U.S. exchange-traded funds (ETFs) linked to Bitcoin’s spot price. Major players, including BlackRock, Fidelity, ARK Investments, 21Shares, and several other asset managers, are awaiting regulatory approval for their Bitcoin ETFs.
Another positive development is Ripple Labs’ partial victory against the United States Securities and Exchange Commission (SEC). This legal win for Ripple initially fueled optimism in the market. However, as traders now await Bitcoin ETF decisions and the SEC’s appeal against Ripple, renewed uncertainty has started to cast a shadow over the market.
JPMorgan’s analysis highlights that this scenario creates a “new round of legal uncertainty” for the crypto market. It also makes the market highly sensitive to future developments. Factors such as rising U.S. real yields and concerns about China’s economic growth have also contributed to the decline in the crypto market.
Despite the recent downtrend, JPMorgan’s researchers believe that there is limited downside for the crypto market in the near term. The completion of most long-position liquidations and a potential deceleration of the selling trend indicate that the worst may be over. However, the market remains susceptible to further volatility based on regulatory decisions and external economic factors.
In conclusion, JPMorgan’s latest research suggests that the recent downtrend in the cryptocurrency market may be coming to an end. The completion of long-position liquidations and a potential slowdown in the selling trend indicate that there may be limited downside for the market in the near term. Nevertheless, the market remains sensitive to regulatory decisions and external economic factors. Traders and investors continue to monitor these developments closely as they navigate the crypto market’s recovery.