Bitcoin
and other cryptocurrencies have soared into the end of 2023, but investors are eyeing whether 2024 will usher in more gains for tokens should take note that J.P. Morgan sees the rally fizzling out—although one coin could be a standout.
The largest digital asset has surged by more than 50% since mid-October, and while Bitcoin has pared gains in recent days, it remains close to its highest level since April 2020. Crypto’s resurgence—after a prolonged and brutal bear market that lasted through much of 2022 and into this year—has sparked calls of a new Bitcoin bull run and thrust tokens back into the spotlight.
Not always for the better. Speaking before Congress earlier this month,
JPMorgan Chase
CEO Jamie Dimon doubled down on his historically anti-crypto position. “I’ve always been deeply opposed to crypto, Bitcoin, etc.,” Dimon said. “If I was the government, I’d close it down.”
While Dimon waxes pessimistic, the analysts he employs continue to cover crypto markets closely—and they see limited upside from current levels as a result of multiple positive factors already being priced-in. To start, there’s anticipation that the Securities and Exchange Commission will soon approve the first spot Bitcoin exchange-traded fund, which could usher in a fresh wave of investor interest in cryptos—key to the current bullish market narrative.
“Excessive optimism by crypto investors arising from an impending approval of spot bitcoin ETFs by the SEC has shifted Bitcoin to the overbought levels seen during 2021,” Nikolaos Panigirtzoglou, who leads a team of analysts at J.P. Morgan, wrote in a recent note. “We continue to see a high chance of buy-the-rumour/sell-the-fact effect once the SEC approves spot Bitcoin ETFs early next year.”
With the SEC facing down a Jan. 10 deadline for the approval of a spot Bitcoin ETF from Ark and 21Shares, any “sell the news” could be coming soon. But the analysts are more broadly wary about just how much these funds will move prices. Panigirtzoglou forecasts that, instead of new capital entering crypto through spot ETFs, it’s more likely that capital will be shifted around within crypto, doing little to meaningfully buoy the space. Existing spot Bitcoin ETFs already exist in Canada and Europe, and have garnered little attention from investors, he added.
There’s also the macroeconomic backdrop, with cryptos gaining alongside the
S&P 500
in the stock market amid expectations that the Federal Reserve will cut interest rates multiple times next year, supporting risk-sensitive assets like Bitcoin.
“We believe that rate markets are overly optimistic about the timing and the magnitude of next year’s rate cuts and as a result we see a high chance that some of these market expectations will be dialed back over the coming months,” Panigirtzoglou wrote. “This would reduce or reverse the support Bitcoin got over the past month.”
J.P. Morgan is also muted on Bitcoin’s so-called halving, a factor that many market participants cite as likely to boost the digital asset in 2024. Due in the first half of next year, the halving is a programmatic change to Bitcoin’s monetary policy that will limit issuance and thus supply, providing prices with another tailwind.
“This argument seems unconvincing as the Bitcoin halving event and its effect are predictable and in our opinion are well factored into the current Bitcoin price,” wrote Panigirtzoglou. “While we are cautious on overall crypto markets into 2024, we are looking for Ethereum to outperform Bitcoin and other cryptocurrencies next year.”
Indeed, while J.P. Morgan is circumspect on crypto moving into next year, they do remain positive on Ether, the token underpinning the widely used Ethereum blockchain network, and the second-largest crypto after Bitcoin. Ether may be better positioned as it faces a key upgrade known as the proto-Danksharding in the first half of next year.
“This upgrade will likely prove a bigger step towards improving Ethereum network activity, thus helping Ethereum to outperform,” Panigirtzoglou wrote. “We believe that next year Ethereum will reassert itself and recapture market share within the crypto ecosystem.”
Write to Jack Denton at [email protected]
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