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Bitcoin and cryptocurrency prices have fallen sharply through September, proving bears right.
The bitcoin price is more than 15% lower than where it began the month, with ethereum and other major cryptocurrencies falling even further. This week, China sent bitcoin tumbling further after it declared all cryptocurrency-related financial activities illegal—wiping $150 billion worth of value from the combined crypto market.
Ahead of China’s latest bitcoin and crypto crackdown, analysts at Wall Street giant JPMorgan JPM +1.2% have warned big investors have begun pivoting out of bitcoin futures and into ethereum amid a “strong divergence in demand.”
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“This is a setback for bitcoin and a reflection of weak demand by institutional investors that tend to use regulated Chicago Mercantile Exchange (CME) futures contracts to gain exposure to bitcoin,” the analysts wrote in a note to clients first seen by Business Insider, pointing to bitcoin futures on the CME trading below the bitcoin price though September.
Researchers found that big investors are eschewing bitcoin futures, pivoting instead to ethereum as the number two cryptocurrency by value gains momentum thanks to the ongoing non-fungible token (NFT) craze and expectations ethereum-based decentralized finance (DeFi) will rival traditional finance. The 21-day average ethereum futures premium rose to 1% over actual ether prices, according to CME data cited by JPMorgan.
“This points to much healthier demand for ethereum vs. bitcoin by institutional investors,” the analysts wrote.
Earlier this month, JPMorgan managing director Nikolaos Panigirtzoglou said retail investors have been propelling smaller cryptocurrencies to never-before-seen highs, with bitcoin’s share of the market now looking “uncomfortably low” by historical standards and “making cryptocurrency markets look frothy again.”
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JPMorgan is the latest in a growing line of crypto market watchers to pile praise on ethereum, with some going as far as to predict ethereum will eventually eclipse bitcoin.
“[Ethereum] is seeing an explosion in developer activity thanks to NFTs and DeFi,” Cathie Wood, the chief executive of Ark Invest, said last week, revealing her confidence in ethereum “has gone up dramatically.”
“I’m fascinated with what’s going on in DeFi, which is collapsing the cost of the infrastructure for financial services in a way that I know that the traditional financial industry does not appreciate right now,” said Wood.
However, it’s feared the latest crypto clampdown in China could slow crypto adoption.
“The announcement of China’s ban on crypto transactions has caused a big sell-off in bitcoin and other altcoins [and] could prove to be a brake on the global adoption of crypto,” Simon Peters, crypto-asset analyst at brokerage eToro, said in emailed comments. SOURCE JPMorgan Warns Big Investors Are Suddenly Dumping Bitcoin For Ethereum Amid A $150 Billion Crypto Price Crash (forbes.com)