The year long digital-asset slump is scaring off institutional money, according to JPMorgan Chase & Co., suggesting a taste for the cryptocurrency markets is fading way.
“Participation by financial institutions in Bitcoin trading appears to be fading,” JPM analysts wrote in a research note dated 14 December. “Key flow metrics have downshifted dramatically,” including in futures markets and in average volumes, they said.
While the surge of institutional interest a year ago was cheered by cryptocurrency enthusiasts as a signal the industry was here to stay, last December’s debut of Bitcoin futures, a Key product for professionals, also coincided with Bitcoin’s apex.
Meanwhile, open interest on Cboe Global Markets has dwindled, and in the past month reached the lowest levels since trading began a year ago.
An equivalent gauge for the more widely used contract on CME is near the bottom of Y 2018’s range, according to data from the Commodity Futures Trading Commission (CFTC).
The daily median transaction size, which reached highs of around $5,000 a year ago during the speculative frenzy, has since fallen to less than $160, the report said, citing data from BitInfoCharts.com.
After the speculative Bull run in digital assets stopped last year, markets have hammered Bitcoin, the most valuable and well-known cryptocurrency.
Since peaking at highs of $19,511 a year ago this month, the token has lost more than 80% of its value. The sell-off spilled over into host of altcoins including Ethereum, Ripple and Litecoin.
“Other cryptocurrencies continue to suffer disproportionately during this correction phase,” JPM’s note added.
Other analysts may gauge institutional interest differently.
The decline in Bitcoin’s price distorts what some consider to be actually increased interest. The sheer number of combined contracts from the 2 venues is set to end the year at an all time high, he said.
In any event, the declines have forced some unprofitable Bitcoin miners to exit the market. Miners provide the server power that underpins transactions on the blockchain and receive new supplies of currency as a reward.
The Bitcoin hashrate, a measure of computational difficulty in running a blockchain that’s used as a proxy for mining activity, has declined since October this year, according to Blockchain.com.
“This suggests that prices have declined to a point where mining is becoming uneconomical for some miners, who have responded by turning their mining rigs off,” JPMorgan said.
On the 1-year anni of Bitcoin’s high, the token was 1.1% higher at $3,534 as of 11:12a in New York Monday, headed toward its 1st 3-day gainer in December, excluding weekends, Monday it rose 11%.
Tuesday Bitcoin is trading at: 3,748.06, +32.21 (+0.8668%) now, the market is open.
At the same time, compared with last December, this month is witnessing more end-of-the-year tax selling.