Two weeks ago, strategists for Wall Street giant JP Morgan predicted that one bitcoin could eventually be worth $146,000 if the cryptocurrency’s volatility converges with that of gold, and investors embrace it as an asset class.
After blasting through December and hitting $42,000 or close to it on Jan 8, bitcoin fell by more than 10 percent to $36,000 or less. Now JP Morgan strategists warn that potential corrections could be on the way and investors following trends could cash out en masse unless bitcoin reclaims its $40,000 highs, Bloomberg reported.
If bitcoin can’t break out above $40,000, JP Morgan strategists including including Nikolaos Panigirtzoglou said that traders “could propagate the past week’s correction” and “momentum signals will naturally decay from here up till the end of March.”
Bitcoin was trading at $37,578.67 as of this writing on Tuesday after falling 1.4 percent to $36,014 as of 3:25 p.m. Monday in London.
The bitcoin price has gained almost 300 percent since October as institutional investors and payments giants such as PayPal and Square buy in.
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Many institutional investors looking for exposure to bitcoin have piled into digital asset manager Grayscale Bitcoin Trust. In Q4 2020, Grayscale raised $3.3 billion across its cryptocurrency investment vehicles — a record. Grayscale averaged $217 million raised every week in the fourth quarter, according to Forbes.
For the bitcoin price to break back above $40,000, “The flow into the Grayscale Bitcoin Trust would likely need to sustain its $100 million per day pace over the coming days and weeks,” according to JPMorgan strategists.
Michael Sonnenshein, the newly-named Grayscale CEO, said over the weekend that the company raised more than $700 million on Friday alone. “Momentum from Q4 seems to picking up speed into the new year,” Sonnenshein tweeted on Jan 16.
Bitcoin may have failed to break the $40,000 threshold but “the support level of around $35,000 has not been broken, and crypto market participants are not panicking,” said FxPro senior financial analyst Alex Kuptsikevich in an email to Forbes. “In early 2021, the focus will be on renewed investment from big capital, as well as the volumes of PayPal and other large companies that have announced their interest in the cryptocurrency market.”