JPMorgan said the fact thatbitcoin futures have been trading below the spot price is a worrying signal.- The bank's analysts said it reflected how weak demand for
bitcoin was among institutional investors. - Bitcoin has rallied over the last two days, but was still around 40% off its April record high on Thursday.
JPMorgan sees worrying signs in the $4 futures market.
The bank's strategists, led by Nikolaos Panigirtzoglou, said the fact that bitcoin futures have been trading at a discount to the spot price - technically known as backwardation - is a sign of weak demand from big players.
"We believe that the return to backwardation in recent weeks has been a negative signal pointing to a bear market," the strategists said in a note on Wednesday.
"This is an unusual development and a reflection of how weak bitcoin demand is at the moment from institutional investors that tend to use regulated CME futures contracts to gain exposure to bitcoin." Futures are contracts that oblige the buyer to purchase an asset at a set price at a fixed date in the future.
Bitcoin has rebounded over the last two days and was up around 4% to $37,915 on Thursday. But it was nonetheless still 40% lower than April's record high of $4.
JPMorgan's strategists said their outlook for bitcoin was negative. They said another worrying signal was that bitcoin's share of the total crypto market $4 during April and May from around 60% towards 40%.
Bitcoin's lower market share is "a bearish signal carrying some echoes of the retail-investor-driven froth of December 2017," they said. Amateur investors moved heavily into alternative coins as the crypto world boomed in 2017, but quickly withdrew from the market as it dropped sharply over 2018.
JPMorgan said the bitcoin futures curve was also in backwardation for most of 2018, when the
Regulatory pressures are also building. On Thursday, the top global banking regulator $4 for financial institutions holding bitcoin.