JPMorgan: What are the key short-term catalysts for the crypto market?

Written by: Brian McGleenon, The Block

Translated by: 五銖, Jinse Finance

Summary

JPMorgan analysts have pointed out several key short-term catalysts that could impact the cryptocurrency market in the coming months, including the seasonal "Uptober" trend, a Federal Reserve rate cut, and Ethereum's upcoming "Pectra" upgrade. However, they added that despite the potential provided by historical trends and structural developments, the market remains highly sensitive to macroeconomic factors and is waiting for clearer catalysts for sustained growth.

JPMorgan analysts identified several key factors that could influence the cryptocurrency market in the coming months, citing technical, geopolitical, and structural events that could drive price trends. In a research report published on Monday, analysts discussed the impacts of the seasonal "Uptober" trend, the Federal Reserve's rate cut, the approval of Bitcoin exchange-traded fund (ETF) options, and Ethereum’s upcoming Pectra upgrade.

October Is Typically a Bullish Month for Cryptocurrencies

One of the key takeaways from the report is the strong historical performance in October, often referred to as "Uptober." Analysts highlighted that more than 70% of Octobers have yielded positive returns for Bitcoin. "While past performance doesn’t predict future outcomes, we believe the popularity of 'Uptober' may influence behavior and lead to Bitcoin performing well in October," the analysts wrote.

Fed Rate Cut Cycle Has Yet to Impact Crypto Market Cap

Despite recent Federal Reserve rate cuts, JPMorgan analysts noted that the broader cryptocurrency market has yet to see the anticipated positive impact. They stated that while a lower interest rate environment typically supports risk assets, the correlation between total crypto market capitalization and the federal funds rate remains weak at 0.46. "Since the Fed’s rate cut on September 18, we have not seen a 'boost' in crypto prices due to the cut," they wrote, adding that the market might be waiting for more sustained stability before making a decisive shift. Moreover, the analysts acknowledged that a lack of historical data makes it difficult to predict how crypto assets will respond to interest rate cycles. "Crypto assets have only really existed since the early to mid-2010s, during which rates were close to zero for most of the time. Stable rates, not just low rates, may provide the greatest benefit to these markets," they said.

Bitcoin ETF Options Could Enhance Market Liquidity

Another potential catalyst is the recent approval of spot Bitcoin ETF options trading. Analysts anticipate this could enhance liquidity and attract new participants to the market. They noted, "With options, investors can now engage with ETFs in a more dynamic way and drive liquidity for the underlying asset." They added that this development could kickstart a positive feedback loop, strengthening market structure and making it easier for institutional investors to access digital assets. In mid-September, the U.S. Securities and Exchange Commission (SEC) approved BlackRock’s iShares Bitcoin Trust spot ETF to list and trade options on Nasdaq. However, final approval still hinges on the Options Clearing Corporation (OCC) and the Commodity Futures Trading Commission (CFTC).

Pectra Upgrade May Have Long-Term Effects on Ethereum

The upcoming Ethereum upgrade, known as "Pectra," was also highlighted as a major development. Pectra combines updates from Prague and Electra and will implement over 30 Ethereum Improvement Proposals (EIPs) to enhance network efficiency, validator operations, and expand account abstraction. "While Pectra is expected to transform Ethereum’s capabilities, we see this upgrade as more structural rather than a direct price catalyst," analysts stated. They believe Pectra’s long-term impact will be to improve Ethereum’s operational efficiency and adoption but are skeptical about it sparking a short-term price rally.

Overall, JPMorgan analysts concluded that the cryptocurrency market is in a state of stagnation, waiting for clearer macroeconomic or structural catalysts to drive sustained growth. "We continue to see the crypto ecosystem growing more sensitive to macro factors, so we await the next major development catalyst and enhanced retail participation to provide long-term growth for the ecosystem," they said.

 

This article is sourced from Foresightnews:

https://foresightnews.pro/article/detail/69161

Sincerely,

The AIC Team

October 14, 2024