The difference between the price of bitcoin in the futures and spot markets testifies to the current weakness of the cryptocurrency, analysts at JPMorgan Bank say.
In a note to clients on Thursday, JPMorgan strategist Nikolaos Panigirtzoglu drew attention to the transformation of the premium on futures into a discount, that is, the excess of the spot price over the futures price. This situation, according to him, has arisen for the first time since 2018. Panigirtzoglu sees the discount as a negative signal for Bitcoin, despite a partial recovery above $ 36,000. He recalls that Bitcoin fell 74% in 2018, after peaking at around $ 20,000 at the end of 2017.
“We believe that the resumption of the discount in recent weeks is a negative signal indicating a bear market. In our opinion, the shift from premium to discount is a bearish signal echoing 2018, ”writes JPMorgan.
Analyzing the moving average of the price difference between the futures and the spot market, Panigirtzoglu found “an unusual development and reflection of how weak the demand for bitcoin from institutional investors has become” trading on the Chicago Mercantile Exchange (CME).
As another alarming signal, he points to a decrease in the share of bitcoin in the total volume of the crypto market. From January to late May, the Bitcoin Dominance Index fell from over 70% to 40%, the lowest in three years.
“Bitcoin needs to climb to $ 39,460, where the top of its recent range is, to be attractive again. We would also like to see him pass that mark so that the bulls can feel that the current vulnerability has passed, ”added Chris Weston, head of research at Pepperstone Financial Pty.
Previously, analysts linked the decrease in activity in the CME futures market with the disappearance of the premium in the Grayscale bitcoin trust, which made arbitrage between them meaningless.
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