Bitcoin and cryptocurrency markets are about to end a difficult year that has wiped some 80% from the value of Bitcoin and even more from some of its biggest rival cryptocurrencies.
The Bitcoin price, which fell to yearly lows of around $3,200 earlier this week, has rebounded somewhat, climbing back above $4,000. That sharp rally may not be enough to reassure Bitcoin buyers who have been burnt by the year-long bear market, however, with the sell-off gathering pace in recent months.
Now, JPMorgan Chase, a U.S. bank, has warned that the sliding Bitcoin market has spooked long-awaited institutional investors who many in the space have been waiting on to spark the next cryptocurrency bull run with a much-needed cash injection.
“Participation by financial institutions in Bitcoin trading appears to be fading,” JPMorgan analysts wrote in a research note to clients, it was first reported by Bloomberg, a newswire. “Key flow metrics [in futures markets and in average volumes] have downshifted dramatically.”
The Bitcoin price peaked in December last year at almost $20,000 but has been falling steadily for most of 2018. In November, a hard fork of the Bitcoin cash cryptocurrency, itself a fork of the original Bitcoin, caused panic to sweep the market and led to a rapid decline in the Bitcoin price.
“Other cryptocurrencies continue to suffer disproportionately during this correction phase,” the bank’s analysts added. “Prices have declined to a point where mining is becoming uneconomical for some miners, who have responded by turning their mining rigs off.”
As the price sinks, some have warned it is becoming uneconomical for Bitcoin and cryptocurrency miners, who create digital tokens using high-powered computers, to keep their machines running and leading to much speculation the great Bitcoin experiment could be coming to an end.
Bitcoin bulls remain confident that a number of high-profile developments could spur the price higher in the near future, however. New York Stock Exchange owner, Intercontinental Exchange, along with coffee chain Starbucks, computing giant Microsoft, and Boston Consulting Group, are backing a new company called Bakkt that will facilitate Bitcoin futures trading by the first quarter of next year, after delaying the launch from November.
In October, Fidelity Investments, which administers more than $7.2 trillion in client assets, unveiled standalone company called Fidelity Digital Asset Services to handle custody, the safe storage of digital assets, for Bitcoin and other cryptocurrencies and will execute trades on multiple exchanges for institutional investors.
Meanwhile, commenting on the JPMorgan research note, Bloomberg Intelligence’s Mike McGlone predicted the most recent Bitcoin price upswing, which has sent the Bitcoin price up some 10% in the last 24 hours.
“Sharp rallies should be expected as the market is extremely over-sold by most metrics,” McGlone said. “Record shorts and extreme discounts to most moving averages.”