28.11.2021

JP Morgan report confirms trend reversal in cryptocurrency market

Banking giant JP Morgan, which actively commented on the decline of the cryptocurrency market from the highs, has remained silent on the topic in recent weeks, while Bitcoin and Ether have added in price by more than 50%.

At the end of this week, JP Morgan analyst Nikolaos Panigirtzoglu finally released a report in which, among other things, he noted a reversal of negative trends in the digital asset segment.

“The sharp recovery in crypto markets over the past three weeks has taken many investors by surprise, which forces us to think about the drivers of this growth,” he writes.

Panigirtzoglu names the activity of institutional players as one of the main factors behind the rise:

“We saw significant momentum in futures as shown in the image below. It shows our estimate of the net change in the volume of investors’ positions in Bitcoin and Ethereum futures of the Chicago Mercantile Exchange (CME) (by the number of contracts excluding price changes). The indicator not only reversed after the decline in the previous stage, but also sets new highs. “

Cryptocurrency futures from January to August 2021

Separately, Panigirtzoglu highlights the activity of commodity trading consultants (CTA):

“Impulse traders like the CTA have likely accelerated the recent rally in prices. Not only the fading of impulse signals stopped, but also a trend reversal, which encourages impulse traders to open new positions. “

Recalling his earlier forecast, the analyst writes:

“Bitcoin’s inability to break the $ 60,000 line resulted in a mechanical shift in momentum to the bearish side and contributed to the further closure of futures positions. This was probably a significant factor in the correction in previous months, associated with the reduction of positions of CTA and other impulse traders. “

Now that the CTAs have made all the profits they can, those same impulse signals have started to rise again, especially the short-term ones. As shown in the image below, they went out of the negative zone into a plus:

pulse signals for bitcoin

A similar situation can be traced in the ether market:

Interest chart for Ethereum futures

In the past, Panigirtzoglu has pointed to the emergence of a discount on Bitcoin futures as a bearish sign that has accompanied the cryptocurrency market throughout the entire 2018 decline. This factor was also eliminated:

“Earlier, we stated that the 21-day average spread should return to the positive zone in order to be able to speak of the end of the previous phase of weakened demand. Now this condition has been met with a confident exit of the indicator in the positive zone. “

Bitcoin Futures Interest Chart

“There are clear signs of improving demand in the futures market , which indicates an increase in institutional interest in cryptocurrencies. Impulse traders like the CTA have likely amplified recent moves while shorter-term impulse signals have changed from negative to positive. Usually at this time the influence of impulse traders is felt the most, as they are forced to exit short positions and start building up long ones, ”the analyst concludes.

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