KEY POINTS

  • JPMorgan strategists said current institutional inflow is not strong enough for Bitcoin to exceed $40,000
  • Bitcoin experienced a parabolic rally in 2020
  • A Deutsche Bank survey revealed investors think Bitcoin’s price might halve rather than double this year

As Bitcoin slides to $31,000, many users hoping for a revisit of $42,000 might not get their wish, according to JPMorgan Chase & Co.

In a note released last Friday, JPMorgan strategists led by Nikolaos Panigirtzoglou said the flows into the $20 billion Grayscale Bitcoin Trust, which is what institutional investors have preferred when dealing with Bitcoin, might have already peaked. Beginning Jan. 22, the fund slid 22% in the past two weeks, alongside a 17% drop in Bitcoin in the same period, Bloomberg reported.

This, according to the JPMorgan strategists, means that institutional inflow is not strong enough at the moment for Bitcoin to revisit $40,000. One of the risks cited is traders unwinding their Bitcoin futures positions.

After trying to breach $34,000 Monday, Bitcoin eventually closed at $32,261 in Coinbase and appears to be forming a sideways trend around this level. The relative strength index stays near 50, which means Bitcoin is currently neither overbought nor oversold, validating predictions that Bitcoin will stay at this level for a while.

Bitcoin experienced a parabolic rally over the past year, from $3,800 in March 2020 to $42,000 on Jan. 8. Institutional investors have begun adding Bitcoin to their portfolio, while corporates like MicroStrategy and Square added Bitcoin to their reserves. The rally reached a fever pitch when Guggenheim Partners CIO Scott Minerd said his institution's valuation of Bitcoin puts it at $400,000 per BTC.

In recent days, prices have stayed below $40,000, and according to JPMorgan, the near-term balance of risks still favors the downside.

One previous report suggested Bitcoin could drop to $26,000 at some point. In another report, Minerd, who championed that Bitcoin’s valuation is $400,000, said Bitcoin’s price might slip to $20,000. Finally, a survey from Deutsche Bank suggested investors think Bitcoin will more likely halve than double its price this year, though the bank did say there is no way to find out when this “bubble” will pop.

Wall Street investment giant BlackRock has said its funds may start investing in bitcoin in what could become a boost for the use of cryptocurrencies Wall Street investment giant BlackRock has said its funds may start investing in bitcoin in what could become a boost for the use of cryptocurrencies Photo: AFP / NICOLAS TUCAT