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The recent downturn in the cryptocurrency market seems to be nearing its conclusion, as JPMorgan’s latest analysis indicates that the majority of long-position liquidations have been finalized.
As reported by Bloomberg, analysts from the American bank believe that the liquidations are “mostly behind us.” This forecast is grounded in the open interest in Bitcoin (BTC) futures contracts on the Chicago Mercantile Exchange (CME), suggesting that the selling momentum may soon slow down. Open interest, which denotes active futures contracts, acts as a gauge of market sentiment and the robustness of price movements.
The decline in Bitcoin’s open interest is interpreted as an indication that the current price trend may be losing strength, according to analysts. “Consequently, we anticipate limited downside for crypto markets in the short term.”
CME BTC Futures Open Interest. Source: CoinGlass
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Recent weeks have seen crypto prices decline due to waning optimism regarding regulatory developments in the United States, as highlighted in the report. On Aug. 26, Bitcoin was trading near $26,000, reflecting an 11.27% decrease over the past month, according to Cointelegraph Markets.
Earlier positive developments had propelled Bitcoin’s price upward. Notably, a series of applications for the first U.S. exchange-traded funds (ETFs) tied to Bitcoin’s spot price contributed to this rise. The list of entities awaiting regulatory approval includes BlackRock, Fidelity, ARK Investments, and 21Shares, among other asset managers.
A partial victory for Ripple Labs against the United States Securities and Exchange Commission (SEC) was another encouraging event. However, this optimism is gradually diminishing, as noted in the analysis, with traders awaiting decisions on Bitcoin ETFs and the SEC’s appeal against Ripple introducing renewed uncertainty.
This situation adds to a “new round of legal uncertainty” for crypto markets, rendering them sensitive to forthcoming developments, according to JPMorgan’s team. Additionally, external market factors have influenced the decline in the crypto market, including rising U.S. real yields and concerns regarding China’s economic growth.
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