Bitcoin’s strongest two-day rally in roughly two weeks has yet to dispel doubts about the vulnerability of the virtual currency after the May debacle.
The cryptocurrency jumped 9% in two days to trade at $ 36,740 as of 7:05 am in London on Thursday. While this dynamic might cheer up the bulls, the JPMorgan Chase & Co. stated that backwardation in the futures market, where the spot price is higher than the futures price, is a cause for caution.
“We believe that the return to backwardation in recent weeks was a negative signal indicating a bear market,” JPMorgan strategists led by Nikolaos Panigirtsoglou wrote in a memo. They added that Bitcoin’s relatively low share of total cryptocurrency value is another worrying trend.
Traders are waiting for the next catalyst to rip Bitcoin out of the $ 30,000 to $ 40,000 range that has existed since the crash from the April record of nearly $ 65,000. Barriers include public criticism of the digital currency’s energy needs from tycoon Elon Musk and tough regulation from China. The bulls rallied a bit on Wednesday after El Salvador made bitcoin legal tender.
The virtual currency “needs to rally to $ 39,460 and the top of the recent range to really attract, but we need to see a break here for the bulls to feel like we are out of this period of vulnerability,” said Chris Weston, head of research with Pepperstone Financial. Pty, the note said on Thursday.
The June 9 analysis from JPMorgan looked at a 21-day moving average of a 2nd Bitcoin futures spread over spot prices. The feedback shown by this is “unusual and a reflection of how weak the demand for bitcoin is currently from institutional investors” using contracts listed on the Chicago Mercantile Exchange.
The curve for bitcoin futures has been in the opposite direction for most of 2018, when the cryptocurrency fell 74% after an impressive boom, according to JPMorgan.
Meanwhile, according to data from the CoinGecko tracker, Bitcoin’s share of the total value of the cryptocurrency market is currently 42%, up from roughly 70% at the beginning of the year. This is partly a sign that retail investors have pissed off other coins, according to some analysts.
Bitcoin’s stake may need to surpass 50% to make it easier to argue that the current bear market is over, according to strategists at JPMorgan.
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