NEW YORK – Mom-and-pop investors piling back into crypto markets after a January pause seem to be behind popular cryptocurrencies – including Bitcoin and Ether – rallying to multi-year highs, according to JPMorgan Chase & Co strategists.
On-chain Bitcoin flows from small wallets – used as a proxy for retail traders – have far outpaced those of institutional investors, after adjusting for inflows into new spot Bitcoin exchange-traded funds (ETFs), the team led by Mr Nikolaos Panigirtzoglou said.
With the largest digital asset on track for six months of gains, investors are likely looking ahead to several critical developments in the space.
“The revival of the retail impulse in February perhaps reflects the anticipation of three main crypto catalysts over the coming months: the Bitcoin halving event, the next major upgrade of the Ethereum network and the prospect of approval of spot Ethereum ETFs by the Securities and Exchange Commission in May,” the bank’s strategists wrote.
“We believe that the first two catalysts are largely priced in, while for the third catalyst, we see only a 50 per cent chance.”
Inflows into newly approved spot Bitcoin funds were adjusted for as large institutional wallets would otherwise appear larger than they truly are, since they hold funds from retail traders who have recently bought into the new funds, the report noted.
February’s heightened retail investments appear to be part of a larger trend. Recent reports from Block, PayPal and Robinhood Markets showed net positive Bitcoin purchases by customers in the fourth quarter of 2023, a sharp improvement from the third quarter’s negative sales, said the strategists.
Meanwhile, earnings at the biggest US cryptocurrency exchange, Coinbase Global, showed the highest quarterly Bitcoin trading volume in two years.
Artificial intelligence and meme tokens in the crypto market – popular assets among retail traders – have also seen notable investments in recent weeks, capturing a larger share of the total cryptocurrency market capitalisation, according to the report. BLOOMBERG
