SUPERNEWS

Crypto

JPMorgan Warns as Bitcoin ETFs See $563.7M Outflow, Retail Sells

JPMorgan advises caution as Bitcoin ETFs see record $1.2 billion outflow, driven by retail investor exodus and broader market concerns.

By Barry Stearns

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5/2, 15:18 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • JPMorgan advises caution in crypto markets, noting significant retail sell-off and a 6% drop in Bitcoin post-halving.
  • Retail investors shift away from bitcoin ETFs and equities in April, impacting market dynamics.
  • Despite recent sell-offs, long-term uptrend for Bitcoin remains intact with potential slide to $50,000.

Retail Exodus from Bitcoin ETFs

April witnessed a significant outflow of retail dollars from bitcoin exchange-traded funds (ETFs), prompting JPMorgan to advise investors to maintain a cautious approach towards cryptocurrency investments. The bank had previously anticipated that the Bitcoin halving event on April 19 would be priced in, predicting a downturn post-event due to overbought conditions, a high price comparison with gold, and a decrease in venture capital activity in the crypto sector. Following the event, Bitcoin's value dropped by 6%, as reported by Coin Metrics. JPMorgan's Nikolaos Panigirtzoglou highlighted, "The past two weeks saw significant selling/profit taking with perhaps retail investors playing a bigger role than institutional investors." He further noted the simultaneous decline in retail investments into equities, indicating a broader trend of reduced retail investment activity.

Record Outflows Amidst Macro Pressures

The cryptocurrency market, particularly Bitcoin, faced its largest monthly decline since June 2022, falling by 16% in April. This sell-off was primarily driven by retail investors, with U.S.-based spot bitcoin ETFs experiencing unprecedented net outflows. On a single day, these ETFs saw a cumulative net outflow of $563.7 million, marking the largest withdrawal since their inception on January 11. This event extended a five-day losing streak, with nearly $1.2 billion being pulled from these ETFs since April 24. Notably, BlackRock's iShares Bitcoin Trust (IBIT) and Fidelity’s FBTC were among the ETFs experiencing significant outflows, despite previously attracting substantial investments in the first quarter.

Institutional Investors' Cautious Stance

While retail investors led the charge in the recent sell-off, institutional investors, particularly momentum traders like commodity trading advisors (CTAs) and other quantitative funds, also took profits on their positions in both Bitcoin and gold. However, JPMorgan's analysis suggests that the position reduction by other institutional investors outside of CTAs and quantitative funds was more limited. This cautious stance by both retail and institutional investors reflects broader concerns over elevated Bitcoin prices, comparison with gold, estimated production costs, and subdued venture capital funding in the crypto sector.

Street Views

  • Nikolaos Panigirtzoglou, JPMorgan (Cautiously Optimistic on Bitcoin):

    "The past two weeks saw significant selling/profit taking with perhaps retail investors playing a bigger role than institutional investors... With a lack of positive catalysts, with the retail impulse dissipating and with the three headwinds mentioned previously … still in place, we maintain a cautious stance on crypto markets over the near term."