JP Morgan Analysts Explain Why Bitcoin Price is Falling

Bitcoin has plunged by almost 9 percent after establishing its new record high near $20,000 last week. And a team of quantitative strategists at JP Morgan & Chase believes that gold is behind the flagship cryptocurrency’s corrective price move.

The analysts, including Nikolas Panigirtzoglou, wrote that Bitcoin price correction lags a similar move in the gold market. Therefore, when the precious metal topped out in August 2020, it prompted investors to secure short-term profits and reinvest the winnings into Bitcoin. That explains why the cryptocurrency boomed by approx 100 percent while the metal fell by 11.50 percent after August.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin rallied by almost 400 percent since March 2020. Source: BTCUSD on
Bitcoin rallied by almost 400 percent since March 2020. Source: BTCUSD on

Now, an inverse fractal is underway. Bitcoin prices have overshot and therefore expect a downside correction to neutralize its momentum signals. Meanwhile, gold is trading near a flipped support level of $1,764, expecting to rebound.

“For Bitcoin,” the strategists explained, “momentum signals have deteriorated, which will likely cause selling by investors that trade on price trends.”

Bitcoin Whales Sniff

Latest reports indicated that Bitcoin’s long-term holders — technically the ones who have held the cryptocurrency for more than 166 days in a row — realized their profits ahead of it hitting an all-time high.

Robbie Liu, an investment analyst at OKEx cryptocurrency exchange, said in a Friday note that retail traders appeared uncertain about entering fresh long positions in the $19,500-20,000 area, allowing big players to overtake as sellers.

“Ultimately, we are likely to witness a battle between the whales and retail traders as Bitcoin tries to test the key psychological level of $20,000.”

Peter Schiff, the chief executive of Euro Pacific Capital — a California-based asset management firm, also noted that “long-term Bitcoin bulls” preferred to sell their profits to seek exposure in rival assets such as gold.


JPMorgan analysts stated that, in the long-term, Bitcoin should retain its bullish bias as more and more investors decide to reshuffle their capital from gold markets. The bank noted that money has poured into the BTC market since October at the precious metal’s expense.

“The adoption of bitcoin by institutional investors has only begun, while for gold its adoption by institutional investors is very advanced,” the analysts wrote.

They pitted listed security Grayscale Bitcoin Trust against exchange-traded funds backed by gold. The former attracted inflows worth $2 million since October, while the latter received $7 billion.