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JPMorgan analysts have voiced skepticism regarding the sustainability of the recent surge in the crypto market, asserting that the “crypto rally looks overdone.”
In a report released on Wednesday, analysts led by Nikolaos Panigirtzoglou highlighted two primary factors they believe have contributed to the recent crypto market rally.
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Spot Bitcoin ETF Approval
The prospect of a spot Bitcoin ETF approval in the U.S. was noted as a potential catalyst for the surge. This approval is seen as a means to attract new money into crypto markets and possibly influence a more lenient approach from the Securities and Exchange Commission (SEC) in the future.
Analysts’ Skepticism
However, the analysts expressed doubt about the feasibility of these factors. They contended that rather than fresh capital entering the crypto industry for newly-approved ETFs, a more plausible scenario is the shift of existing capital from products such as the Grayscale Bitcoin trust, Bitcoin futures ETFs, and publicly listed Bitcoin mining companies into the newly-approved spot Bitcoin ETFs.
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Global Precedents
Additionally, the analysts pointed out that spot Bitcoin ETFs in Canada and Europe, although already available, have generated minimal interest from investors since their launch, leading to skepticism about the influx of fresh capital into newly approved spot Bitcoin ETFs in the U.S.
Legal Cases and Regulatory Uncertainty
The second major factor influencing the recent crypto rally, according to the analysts, is the SEC’s setbacks in legal cases against Ripple and Grayscale. Despite these legal defeats, the analysts expressed uncertainty about a significant easing of crypto regulations in the future, emphasizing the industry’s current lack of regulation.
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Pending U.S. Regulations
They noted that U.S. crypto industry regulations are still pending, and recent legal cases are unlikely to sway the stance of lawmakers, especially considering the lingering impact of the FTX fraud case.
Bitcoin Halving Event
Addressing the optimism surrounding the upcoming Bitcoin halving event in April/May 2024, which is anticipated to reduce the supply of new bitcoins and potentially drive up prices, the JPMorgan analysts dismissed the notion.
Already Priced In
They argued that the halving event is already priced into the market, emphasizing the predictability of its effects on the Bitcoin price.
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Conclusion
The analysts highlighted that examining the Bitcoin production cost post-halving, considering current hash rates and difficulty, suggests a rise in production cost from $21,000 to approximately $43,000. However, they asserted that the current price of around $35,000 aligns with an expected 20% drop in hash rates, indicating that the halving event’s impact is already largely reflected in the current Bitcoin price.
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