If the leading cryptocurrency isn’t able to break back above $60,000 soon, momentum signals will collapse, strategists at JPMorgan led by Panigirtzoglou wrote in a note Tuesday. It’s likely traders, including Commodity Trading Advisers (CTAs) and crypto funds, were at least partly behind the buildup of long Bitcoin futures in recent weeks, as well as the unwind in past days, strategists noted. Bitcoin has witnessed a massive rally this year as its price went on to break new all-time highs frequently.
Bitcoin futures markets experienced a steep liquidation.
According to the Bloomberg report, “Over the past few days Bitcoin futures markets experienced a steep liquidation in a similar fashion to the middle of last February, middle of last January or the end of last November,” JPMorgan strategists said. “Momentum signals will naturally decay from here for several months, given their still-elevated level,” they added. Strategists further noted that the overall flow impulse was strong enough to allow Bitcoin to quickly break out above the key thresholds in those three previous instances, yielding further buildups in position by momentum traders.
Bitcoin continues to trade above $55,600.
The leading cryptocurrency by market capitalization, bitcoin, rose as high as $64,870 around the time of the Nasdaq listing of Coinbase Global Inc. but has retreated back below $60,000. The cryptocurrency is still up about 90% year-to-date. At the time of writing, BTC is changing hands at just above $55,600. “Whether we see a repeat of those previous episodes in the current conjuncture remains to be seen,” the strategists at the bank said. The likelihood it will happen again seems lower because momentum decay seems more advanced and thus more difficult to reverse, JPMorgan added.