On 17 February, Bitcoin traded above the $51,000 mark and reached $51,715 at 9:50 AM UTC. The recent surge can be attributed to mainstream adoption after Tesla, MasterCard, MicroStrategy, and others announced their BTC-focused plans, one after the other.
However, strategists at JP Morgan are of the opinion that the current price of Bitcoin is “unsustainable,” unless the volatility of the asset’s price “subsides quickly.”
The researchers found it remarkable that over the past five months Bitcoin’s market cap increased by $700 billion while “little institutional flow” of around $11 billion took place since the end of September.
With regard to the possibility of how limited flow would increase Bitcoin’s market cap, JP Morgan believed that one possibility is the increase in interest from real money investors and speculative investors. On the other hand, retail inflows may have “magnified” institutional flow.
Analysts Nikolaos Panigirtzoglou, Mika Inkinen and others suggested that real money inflows during Q4 2020 increased Bitcoin prices, while January 2021 rally has been influenced by speculative flows. Thus, in order to sustain Bitcoin’s current prices, the asset would need an increase in real money flows.
Moreover, retail impulse in US has been strong since January, which analysts claim has been “a driving force” for Bitcoin. The analysts also compared performance of Ethereum futures trading on CME with Bitcoin futures which was listed in December 2017.
According to JP Morgan, the initial interest has grown “rather cautiously.” Given the fact that investor interest in crypto is fairly new, with only “a few years to mature,” it will “not take as long” for Ethereum futures to gain traction as it initially did for Bitcoin futures.