27.05.2022 – JPMorgan has just come out as a bullish Bitcoin investor. We are curious to see if this is enough to counter the barely concealed warnings from the European Central Bank about a crypto ban.
Bitcoin’s charting remains dicey from a bulls’ perspective. BTC continues to trade below the 50 moving average in the weekly chart. The 30,000 as a psychologically important mark had better be recaptured quickly now. In addition, you can see that the lows from winter 2020 and spring 2021 are being tested right now. Below that, the abyss lurks.
Source: Bernstein Bank GmbH
JPMorgan’s Nikolaos Panigirtzoglou said that most metrics related to turnover and positioning have been very negative for cryptos recently. For example, index funds investing in BTC have seen significant outflows over the past four weeks – the largest drop since May 2021, he said, adding that the situation is currently oversold. The recent correction in Bitcoin and other cryptos looks like a de facto capitulation – and that offers upside potential.
Four arguments for cryptos
JPMorgan listed four factors in favor of cryptos as an alternative institutional asset class. First, monetary policy in the wake of the Corona pandemic: it pumped additional money into the market and fueled demand for an alternative currency. After the Lehman crash, gold had played that role. Now, BTC has come along for the ride.
Second, the fact that cryptos survived the long winter of 2018/2019 and that, contrary to many expectations, the market value did not slide to zero then. This had boosted confidence among institutional investors. Third, the encouragement from corporations in the summer of 2020, with the addition of Microstrategy, Square, PayPal, and Tesla giving investors confidence. Fourth, the push toward more “digitization” in cryptos and the turn toward distributed ledger technology in networks. DLT is a technique used to document certain transactions.
Confidence among investors
All in all, venture capital (VC) had not retreated even after the collapse of the Terra ecosystem. We had reported here on the sell-off of BTC to prop up Terra. Of the $25 billion that has flowed into cryptos from VC so far this year, nearly $4 billion would come from after the Terra collapse. All told, BTC is currently undervalued by about a quarter, he said. So far JPMorgan. That leaves two complementary reports: Fund firm Andreessen Horowitz just announced the closure of its fourth crypto fund with assets of $4.5 billion. In contrast, NGC Ventures launched its third blockchain fund with about $100 million.
Mentored thinking in Europe
But once again, we need to alert you to the danger of (monetary) politics killing cryptos. Christine Lagarde, president of the European Central Bank, has just come out in favor of regulating cryptocurrencies. Speaking on Dutch television, the said she is concerned about people “who don’t understand the risks, who will lose everything and be terribly disappointed, which is why I think this should be regulated.” She went on to say that regulators are taking a closer look at the sector amid concerns that dangers could arise for the financial system as a whole.
Lagarde went on to say, “My very sober assessment is that cryptocurrencies are worth nothing, they are based on nothing, there is no underlying asset that acts as a security anchor.” And already she presented the salvation for all the poor sheeple who are not in a position to judge for themselves: “The day we release the central bank digital currency, a digital euro, I will guarantee that the central bank will stand behind it, and I think it will be very different from many of these things.”
We hope you have the right intuition in this mishmash and wish you good luck with your trades and investments!
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7