A JPMorgan analyst holds a strong belief that the worst phase of the ongoing Bitcoin price decline is now in the past.
It’s worth noting that Bitcoin isn’t the only cryptocurrency facing challenges. Nikolaos Panigirtzoglou links the recent weakness in the world’s most significant cryptocurrency to the closure of many long positions.
These positions were closed as optimism stemming from positive news, such as the potential approval of a Spot Bitcoin ETF, started to diminish. However, he also emphasized:
“This unwinding of long positions appears to be at its end phase rather than its beginning. As a result, we see limited downside for crypto markets over the near term.”
Broader Market Challenges
Bitcoin isn’t the only asset associated with risk that has faced a challenging few weeks. Concerns related to China and rising real yields in the United States have been impacting the technology sector broadly. The Nasdaq Composite index, for instance, has declined by approximately 7.0% from its recent peak.
Investor Caution and Regulatory Uncertainty
Why are investors choosing to remain cautious and not actively participate? Panigirtzoglou acknowledges that there have been positive developments in the cryptocurrency market, such as PayPal Holdings introducing its own stablecoin pegged to the U.S. dollar and the launch of “Base” by Coinbase Global Inc.
However, investors are opting to stay on the sidelines and await regulatory clarity. Part of the reason for this cautious approach is that the Securities and Exchange Commission (SEC) has filed an appeal against the recent decision that favoured Ripple, as outlined in his research note today.
“Appeal could result in a trial with the outcome not expected until next year, inducing a new round of legal uncertainty for crypto and making them sensitive to any mid-process news.”
Federal Reserve Chair’s Remarks
Federal Reserve Chair Powell’s remarks at the Jackson Hole symposium on Friday suggested that interest rates may increase further and that there are no immediate plans to reduce them, posing a negative outlook for cryptocurrencies.