Cryptocurrency markets suffered a sharp correction in the past week with the price of bitcoin (BTC) falling by over 15% before rebounding after the Federal Open Market Committee (FOMC) meeting on Wednesday. The sell-off may not be over as positioning still looks overbought, JPMorgan (JPM) said in a research report Thursday.
“There remains considerable optimism in the market over the prospect for prices rising significantly by year-end, with a significant component of that optimism arising from a view that bitcoin demand via spot exchange-traded funds (ETFs) would continue at the same pace even as the supply of bitcoin diminishes after the halving event,” analysts led by Nikolaos Panigirtzoglou wrote.
However, the bank notes that the pace of net inflows into spot bitcoin ETFs has slowed considerably, with a significant outflow recorded in the past week.
“This challenges the notion that the spot bitcoin ETF flow picture is going to be characterized as a sustained one-way net inflow,” the authors wrote.
“In fact, as we approach the halving event this profit-taking is more likely to continue, particularly against a positioning backdrop that still looks overbought despite the past week’s correction,” the report said.