JPMorgan Chase warns: Bitcoin rally will fade if it doesn’t break $60,000

Ethereum has delivered gains for crypto traders on Wednesday, while bitcoin has been lackluster so far this week. Bitcoin has remained near $55,000 for nearly a month. The last time bitcoin closed below that level was on March 26, according to CoinDesk 20 historical data.

(Source: Coindesk)

Bitcoin's dominance has fallen sharply since the beginning of April. It has fallen nearly 10% since April 1, and Bitcoin now accounts for 51% of the market share, compared to more than 70% at the beginning of 2021. "Traders are looking for opportunities elsewhere," noted David Russell, vice president of market intelligence at brokerage firm TradeDepot Group. "That seems to be what is happening now. This is not a bear market, but a potential sign of confidence in the crypto market."

(Source: TradingView)

Ethereum, on the other hand, rose 3.2% to above $2,400. Looking at the Ethereum/Bitcoin chart, the ratio is currently rising, meaning that traders are selling Bitcoin for Ether. The current ratio is well above the 10-day and 50-day moving averages.

(Source: TradingView)

Deutsche Börse said on Wednesday that it would delist shares of cryptocurrency exchange Coinbase from its Xetra trading system and the Frankfurt Stock Exchange by the end of trading hours on Friday, April 23, due to the lack of necessary documents to qualify the stock on its platform. Deutsche Börse said that although Coinbase provided a code required for trading (the so-called LEI code) when it was listed, it was not correctly linked to the listed entity. The LEI code is a 20-character unique reference, like a barcode, which allows assets to be identified in transactions and is used by regulators to supervise the market. It contains information about the ownership structure of an entity and has become a required information. "We have noticed an administrative error, which has made it necessary for Coinbase to resubmit certain documents to certain European stock exchanges," a Coinbase spokesperson said. "Trading in Coinbase shares is currently not interrupted. We are working to resolve this issue as quickly as possible." A Deutsche Börse spokesperson said: "The only way to allow Coinbase to re-enter trading is for the issuer to apply for an LEI." But the German exchange's erroneous code does not affect the company's stock trading in the United States. “It’s just a hiccup,” said Charlie Morris, fund manager and founder of ByteTree.com, a cryptocurrency price discovery site in London. “Most of the big U.S. companies are listed in Germany, but the volumes are low.”

Raoul Pal, a former Bitcoin enthusiast at Goldman Sachs, said Bitcoin's volatility is its main attraction because it is this volatility that has allowed Bitcoin to grow exponentially. "People have to learn to live with assets that are so volatile," Pal said on Wednesday. He has a diversified portfolio of crypto assets covering exchanges, decentralized finance (DeFi) and community tokens. "I'm probably 50% Bitcoin, 30% Ethereum, and 20% alternative tokens right now... I'm going to try to keep a balance across the game because I really don't know what will win and what won't in this space." Pal said he also has a small exposure to the meme-based cryptocurrency Dogecoin, "to have fun with it." "It's become a joke and a network in itself. Will it last forever? Who knows? But I bought some anyway because everyone is behind me." Pal said increased regulation and uncertainty could push Bitcoin lower. However, Pal said the market is more worried about uncertainty than regulation itself, and he expects it to benefit Bitcoin in the long run. "I don't think anyone is going to stop this space," he said, adding that governments will eventually strike a balance to ensure that crypto assets are taxed.

While insisting that he remains bullish on Bitcoin in the long term, Scott Minerd, global chief investment officer of Guggenheim Partners, said on Wednesday that Bitcoin has gone too far, too fast. "Given the huge moves we've had in Bitcoin in the short term, things are very frothy and I think we're going to have to have a major correction in Bitcoin," he said. "I think the price of Bitcoin could fall back to $20,000 to $30,000, which is a 50% drop, but the interesting thing is, we've seen this drop before," Minerd said. However, he believes this is part of the "normal evolution of a long-term bull market" and that Bitcoin prices will eventually reach $400,000 to $600,000 per unit.

Momentum signals will break down if the largest cryptocurrency doesn't break above $60,000 soon, JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note on Tuesday. They said traders, including commodity trading advisors (CRAs) and crypto funds, may have been at least partly behind the accumulation of longs in bitcoin futures in recent weeks, as well as the liquidations of positions over the past few days. "Over the past few days, the bitcoin futures market has experienced large liquidations similar to those seen in mid-February, mid-January, or late November last year," the strategists said. "Momentum signals will naturally decay over the next few months as they remain elevated." In all three instances, JPMorgan noted, the overall momentum of flows was strong enough to move bitcoin past key thresholds quickly, leading momentum traders to add further positions. "It remains to be seen whether we will see a repeat of the previous scenarios in the current situation," the strategists said, adding that the likelihood of this happening again appears lower because momentum decay appears to have occurred earlier and is therefore more difficult to reverse. Flows into bitcoin funds also appear weak, they said.

From a technical perspective, Bitcoin has fallen five of the past six trading days and is now below its 50-day moving average of around $56,819. This is a bearish indicator for many chart analysts as it tends to determine the momentum trend of prices. If Bitcoin fails to break above the short-term trendline, it could move lower and test the $50,000 level, which would mean a further drop of around 10%. The next support level would be the 100-day moving average of around $49,212. (FX168)