Bitcoin, after roaring through December and into the new year, has suddenly stalled.
The bitcoin price topped $42,000 per bitcoin earlier this month, double its 2017 high, but has struggled maintain its momentum, dropping to around $36,000 (even as smaller cryptocurrencies make massive gains).
Unless bitcoin is able to “break out” above $40,000 soon, trend-following investors could begin to cash out, JPMorgan analysts wrote in a note first reported by Bloomberg.
Bitcoin investors looking to take profits from the huge bitcoin price boom “could propagate the past week’s correction,” and “momentum signals will naturally decay from here up till the end of March,” the analyst team warned.
The bitcoin price has added a whopping near-300% since October, soaring as institutional investors warm to the cryptocurrency and payments giants such as PayPal
Many institutional investors looking for exposure to bitcoin have piled into the Grayscale Bitcoin Trust over the last year. In the last quarter of 2020, Grayscale raised $3.3 billion across its cryptocurrency investment vehicles, a record for the digital asset manager. Its popular Grayscale Bitcoin Trust averaged $217 million raised every week in the final three months of the year.
JPMorgan warned this pace will need to be maintained and even quickened for the bitcoin price to break back above $40,000.
“The flow into the Grayscale Bitcoin Trust would likely need to sustain its $100 million per day pace over the coming days and weeks for such a breakout to occur,” according to JPMorgan strategists.
But that maybe conservative estimate of demand, with Michael Sonnenshein, the newly-named Grayscale chief executive, revealing over the weekend the company raised more than $700 million on Friday alone, tweeting “momentum from Q4 seems to picking up speed into the new year.”
Elsewhere, other bitcoin and crypto market watchers, still giddy from bitcoin’s huge December rally, remain broadly upbeat.
“Bitcoin failed to break the $40,000 threshold again, remaining within a corrective scenario,” Alex Kuptsikevich, FxPro senior financial analyst, said in emailed comments.
“Nevertheless, the support level of around $35,000 has not been broken, and crypto market participants are not panicking. In early 2021, the focus will be on renewed investment from big capital, as well as the volumes of PayPal and other large companies that have announced their interest in the cryptocurrency market.”