Bitcoin's momentum will slow for months if it's unable to quickly climb back above the crucial $60,000 level - and 2 main hurdles stand in its way, JPMorgan says
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Matthew Fox
Apr 21, 2021, 21:01 IST
Bitcoin replica coins are seen on November 13, 2017.Jaap Arriens/NurPhoto via Getty Images
A decay in momentum could represent a big problem for bitcoin, JPMorgan said in a Tuesday note.
A steep liquidation in bitcoin futures contracts has transpired over recent days, suggesting future weakness in the cryptocurrency.
"The challenge for bitcoin momentum in the current conjecture is to break above $60,000," JPMorgan said.
A decline in momentum could set bitcoin up for weakness going forward, according to a Tuesday note from JPMorgan.
Over the past few days, bitcoin futures contracts have faced a steep liquidation, which in the past has occurred near big round price levels. Certain thresholds like $20,000 in November, $30,000 in mid-January, and $50,000 in mid-February were all met with a brief decay in momentum.
According to the bank, it's likely that momentum traders are behind the buildup and decline of long bitcoin futures in recent week.
"Each previous episode presented a challenge for bitcoin momentum to break out above the certain price thresholds," JPMorgan said.
Now, that price threshold is the $60,000 level. If bitcoin fails to break out above the $60,000 level, momentum signals "will naturally decay from here for several months, given their still elevated level," JPMorgan said.
JPMorgan is doubtful that bitcoin will be able to break above the key $60,000 level amid a decline in momentum for two reasons.
"First, the decay in our bitcoin momentum signals seems more advanced, reminiscent of the second half of 2019, and thus more difficult to reverse than in the previous three episodes. Second, the flow into bitcoin funds appears weak, raising concerns about the strength of the overall bitcoin flow picture at the moment," JPMorgan concluded.
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