JPMorgan Forecasts Crypto Market Recovery in August

Global investment bank JPMorgan predicts that the cryptocurrency market will rebound beginning in August. The bank recently reduced its estimate of the year-to-date crypto net flow from $12 billion to $8 billion, citing the sale of assets by the German government and large bitcoin liquidations by creditors of Mt. Gox as the reasons for the shift. Analysts at JPMorgan believe that when exchange reserves deplete, this move will aid in market stabilization.

Key Factors Behind the Revised Estimate

In a research report released on Wednesday, JPMorgan highlighted the factors driving the reduction in its crypto net flow estimate. Led by managing director and global strategist Nikolaos Panigirtzoglou, the analysts noted a decline in bitcoin reserves across exchanges over the past month. This drop is primarily due to bitcoin liquidations by Mt. Gox creditors, Gemini creditors, and the German government’s sale of seized assets.

The German government has been actively liquidating its seized bitcoin holdings. By Thursday morning, the German bitcoin stash had decreased from 13,110 BTC on Wednesday to 9,925 BTC. Concurrently, Mt. Gox’s Rehabilitation Trustee began repaying creditors last week. Mt. Gox, once the largest bitcoin exchange, collapsed in 2014 after major hack that resulted in the loss of 850,000 bitcoins. The trustee has started distributing approximately $9 billion worth of bitcoin (BTC) and $50.8 million in bitcoin cash (BCH) to creditors.

$14 billion in net flows into cryptocurrency funds, $5 billion from futures on the Chicago Mercantile Exchange (CME), and $5.7 billion from venture capital funds focused on cryptocurrency are all included in JPMorgan’s updated estimate of $8 billion. The $17 billion shift from exchange wallets to new spot bitcoin exchange-traded funds (ETFs) is factored into this figure.

The high value of bitcoin in relation to its manufacturing cost and gold price was one of the reasons behind the bank’s concern about the initial $12 billion estimate. In June, JPMorgan expressed worries about the industry’s future and questioned the durability of the $12 billion in crypto inflows.

As exchange reserves decrease, JPMorgan’s analysts predict that the updated net flow estimate will help calm the market and set the stage for a possible recovery that may begin in August.