Tevarak
JPMorgan expressed uncertainty about the sustainability of strong net inflows into cryptocurrencies so far this year.
Net cryptocurrency inflows so far this year of $12 billion (which could grow to $26 billion by the end of 2024 if flows continue at the same pace) have been largely boosted due to the attractiveness of spot bitcoin (BTC-USD) exchange-traded funds, analyst Nikolaos Panigirtzoglou wrote in a recent note.
These bitcoin holding products have attracted $16 billion in net inflows since their inception, according to the note. Adding in flows from CME (CME) futures and capital raised by crypto venture capital funds, total crypto inflows have reached $25 billion so far this year.
Although it is an impressive figure, Panigirtzoglou noted that it may not fully represent the influx of new money into the crypto space. “We think there has probably been a significant rotation away from digital wallets on exchanges toward new spot bitcoin ETFs,” she explained.
This change is notable, he noted, as bitcoin (BTC-USD) reserves on exchanges have fallen by 220,000 BTC, or $13 billion, since the ETFs launched in January. “This implies that the majority of the $16 billion inflows into spot bitcoin ETFs since their launch likely reflect a rotation from existing digital wallets onto exchanges.”
He attributed the rotation to “the profitability, increased liquidity, regulatory protection and convenience of the ETF wrapper that has become market participants’ preferred instrument for bitcoin exposure, both for existing and new crypto investors.” “.
Overall, the analyst is skeptical that cryptocurrency inflows will continue at the same pace for the rest of the year, given how high the price of bitcoin (BTC-USD) is relative to the cost of producing one or relative to gold.
In fact, the price of bitcoin (BTC-USD) has risen notably this year, jumping approximately 51%, after reaching an all-time high of more than $73,000 in March. Since peaking, the token has been consolidating in the trading range between $59,000 and $71,000 as investors look for potential catalysts. BTC changed hands at $65.4k in Friday afternoon trading.
Most Seeking Alpha analysts are bullish on bitcoin (BTC-USD). However, JH Research believes that “the lackluster and declining media attention and interest in Bitcoin far outweighs the effects of “several” events on the horizon that will likely cause marginal growth in demand.”
The SA contributor noted that searches and price spikes have a strong historical relationship. “Major demonstrations have only come along with attention and interest in climbing, something that is not present currently.”