JPMorgan doesn't expect a big move higher in crypto in the near future. Cryptocurrencies including bitcoin rallied to start the week following a social media update by President Donald Trump on the widely expected bitcoin stockpile, which has become a "strategic crypto reserve." Those gains quickly reversed as part of a broader sell-off on tariff concerns, but there is also lingering skepticism about the crypto reserve now that the market has had some time to digest it, JPMorgan's Nikolaos Panigirtzoglou said in a note Wednesday. "Overall we believe that crypto markets are likely to remain under pressure over the near term," he said. "Not only is there skepticism about congressional approval for such a strategic crypto reserve, but also the feasibility of including smaller tokens outside bitcoin and [ether] given their higher risk and volatility." Panigirtzoglou went on to highlight that bitcoin reserves have failed to gain traction at the state level, with Montana, North Dakota, South Dakota and Wyoming rejecting proposals due to concerns about risk and volatility. The central banks of Switzerland and Poland have also rejected the idea, he noted. With the market still absent a crypto-specific catalyst, demand for bitcoin has weakened, he also pointed out. "Institutional investors appeared to have also reduced their positions due to lack of positive catalysts and due to momentum decay," he said. "Our futures position proxies for bitcoin and [ether] based on open interest changes in CME futures contracts, have subsided but rather modestly … suggesting there is room for further position unwinding, especially now that momentum traders have started building up short positions." Another sign of weaker demand is the recent $2 billion convertible debt issued by Strategy, formerly known as MicroStrategy, Panigirtzoglou said. Since the election, Strategy and bitcoin miners such as Mara Holdings have raised large amounts of capital by issuing equity and debt, which has contributed to bitcoin's price appreciation. But now the terms of these deals are "increasingly more investor-friendly over the past month or so," he explained, "indicating that investors are becoming more cautious and more selective."
