Key Points:
- Bitcoin’s decline likely ending as long positions unwind.
- Regulatory uncertainty keeps investors cautious despite positive news.
- Tech sector hit by China worries and crypto market volatility.
A JPMorgan analyst suggests that the downward trend in Bitcoin’s price may be coming to a close. The decline in Bitcoin’s value has been influenced by various factors, including the liquidation of long positions triggered by fading positive news, such as the pending approval of a Spot Bitcoin ETF. However, the analyst, Nikolaos Panigirtzoglou, believes that this unwinding of long positions is reaching its conclusion rather than just starting. As a result, the potential for further downside in the cryptocurrency markets seems limited in the near future.
It’s worth noting that Bitcoin isn’t the only asset facing challenges. Concerns related to China and higher real yields in the U.S. have also impacted the broader tech sector, leading to a 7.0% decline in the Nasdaq Composite index from its recent peak.
The analyst acknowledges positive developments in the crypto market, such as PayPal Holdings introducing a stablecoin pegged to the dollar and Coinbase Global Inc.’s launch of “Base.” Despite these advancements, investors remain cautious and hesitant due to regulatory uncertainties. Specifically, the Securities & Exchange Commission’s appeal against a recent decision in favor of Ripple has created a sense of uncertainty. The potential trial resulting from this appeal, expected next year, could introduce a fresh wave of legal ambiguity for cryptocurrencies, making them sensitive to any interim news.
Adding to the cautious sentiment, Fed Chair Powell mentioned during the Jackson Hole symposium that interest rates might continue to rise and indicated no immediate plans to reduce rates. This stance doesn’t align favorably with cryptocurrencies either.
