JP Morgan Analyst Flips, Says Institutions Driving Price of Bitcoin

A new report from JP Morgan finds institutional investors are influencing the structure of the Bitcoin market – a conclusion that contradicts previous analysis from the financial giant.

Nikolaos Panigirtzoglou and other JP Morgan strategists published a report on Friday that cited research from cryptocurrency asset manager Bitwise and the Blockchain Transparency Institute, according to Bloomberg. Bitwise’s much-publicized research suggests that 95% of reported Bitcoin trading volume “is fake or non-economic in nature,” and that the numbers are inflated by crypto exchanges eager to appear higher in rankings.

Consequently, according to Panigirtzoglou,

“…the importance of the listed futures market has been significantly understated.”

“The report by Bitwise credits the traded futures as an important development in allowing short exposures that enabled arbitrageurs in properly engaging in arbitrage, and that the futures share of spot Bitcoin volumes increased sharply in April/May…

The overstatement of trading volumes by cryptocurrency exchanges, and by implication the understatement of the importance of listed futures, suggests that market structure has likely changed considerably since the previous spike in Bitcoin prices in end-2017 with a greater influence from institutional investors.”

Those comments are markedly different from what Panigirtzoglou has suggested previously. In a report published last December, when BTC was trading just under $3,200, Panigirtzoglou said,

“Participation by financial institutions in bitcoin trading appears to be fading. Key flow metrics [in futures markets and in average volumes] have downshifted dramatically.”

In an interview on CNBC in February, Panigirtzoglou hedged those remarks, saying declining interest in crypto from major financial institutions was likely temporary.

“The stability that we are seeing right now in the cryptocurrency market is setting the stage for more participation by institutional investors in the future. The cryptocurrency market was a new market. It went through a bubble phase – the burst.”

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