Bitcoin’s correction odds would increase if flows to the world’s largest commercial cryptocurrency fund slowed significantly, according to strategists at JPMorgan Chase & Co.
The Grayscale Bitcoin Trust’s assets under management have climbed to $ 13.1 billion from $ 2 billion at the beginning of December last year, in the midst of a treble in the price of digital currency so far in 2020. The inflows to the fund are running at about $ 1 billion a month, the strategists led by Nikolaos Panigirtzoglou wrote in a note on Friday.
While it is difficult to avoid describing Bitcoin as “over-thinking,” the flows to the trust “are too large to allow any unflinching situation from momentum traders to generate ongoing negative price dynamics,” said the strategists. A major slowdown in those flows would boost the risk of a Bitcoin correction similar to the one in the second half of 2019, they said.
Bitcoin reached an all-time high of $ 24,291.38 on Sunday, according to a composite of prices compiled by Bloomberg. Supporters of the cryptocurrency argue that it is gaining ground among longer-term investors as a hedge against dollar weakness and risks such as higher inflation. Others claim that unsustainable speculative cravings, exacerbated by trend-following volume funds, are behind much of the rally in Bitcoin and other digital assets.
In 2019, the largest cryptocurrency slipped 44% from a peak in late June to $ 7,158 by the end of that year, though it still nearly doubled for the whole of 2019.
There are signs of growing corporate and institutional interest in Bitcoin despite its notorious volatility. Square Inc.’s public companies invested and MicroStrategy Inc. in it recently. Investment managers Paul Tudor Jones and Stan Druckenmiller have backed the digital asset as a hedge against inflationary pressures, although price rises remain subdued.
Massachusetts Mutual Life Insurance Co., which has been around since 1851, said this month that it had purchased $ 100 million of Bitcoin for its general investment fund.
Over the weekend, Elon Musk asked about converting Tesla Inc.’s “big transactions” balance sheet. in Bitcoin in a Twitter exchange with Michael Saylor, chief executive officer of MicroStrategy.
“Are such large transactions even possible?” Musk tweeted in response to Saylor. He was reassured by many, as was Saylor, who said he had bought more than $ 1.3 billion in Bitcoin and offered to share his “playbook” offline.
Bitcoin climbed about 2% to $ 23,903 at 2:31 pm in Tokyo. The broader Bloomberg Galaxy Crypto Index also advanced at about 2%.