Anika Begay
Banking giant JPMorgan has said that in the face of ongoing cryptocurrency market liquidation across all asset classes, a “buy-the-dip” opportunity will soon present itself. From its intraday low of around $50,000, Bitcoin (BTC) has seen a dramatic rally of over 8%, bouncing above $54,000 and causing short liquidations in the cryptocurrency market.
Bitcoin Rebounds, Shorts Are Liquidated
Bitcoin has rebounded 8% after falling below $50,000 twice in 12 hours. This major reversal saw nearly $40 million worth of Bitcoin short positions sold in the previous hour, according to Coinglass. Recent cryptocurrency market short liquidations total $57 million.
As the sell-off in global stocks intensified on Monday, JPMorgan Chase’s trading desk said the rotation out of the tech sector may be “mostly complete” and that the market is “approaching” a tactical opportunity to buy the dip https://t.co/Hr6oaXHJ1b
— Bloomberg (@business) August 5, 2024
JPMorgan Strategic Outlook
JPMorgan’s trading desk noted that the rotation into tech is virtually complete and that the market is very close to providing a “tactical” buy-low opportunity as the sell-off in global markets deepened on Monday. Early trading hours saw the Nasdaq fall 5%, as calls for a potential emergency Fed conference gained steam.
John Schlegel, head of positioning intelligence for JPMorgan, said:
“Overall, we believe we are approaching a tactical opportunity to buy dip; our Tactical Positioning Monitor may deepen further in the coming days. That said, future macro data will determine whether or not we see a strong rebound.”
Market sentiment and volatility
HODL photo.twitter.com/qIMam5yFaI
— Michael Saylor⚡️ (@saylor) August 5, 2024
JPMorgan also cut its estimate for year-to-date cryptocurrency net inflows from $12 billion to $8 billion, largely due to dwindling exchange holdings of Bitcoin over the past month. The bank cited factors such as asset sales seized by the German government, Gemini creditors and Mt. Gox.
Major cryptocurrency traders like MicroStrategy’s Michael Saylor, who are holding onto their Bitcoin investments despite the current decline, are showing some confidence among major market participants. But the volatility index has soared to over 50 levels, last seen during the COVID-19 pandemic crisis in April 2020.
Analysts warn that, especially if the Fed’s actions exacerbate market volatility, the recovery of the cryptocurrency market may not be rapid, even if there are buying opportunities.
The current cryptocurrency market recovery may be short-lived, according to JPMorgan analysts, who questioned the recovery’s duration. Recession fears have caused a total outflow of $400 million from the cryptocurrency market, with Bitcoin seeing the biggest decline.
The erratic market conditions call for caution, although JPMorgan’s study and Bitcoin’s latest behavior point to a possible purchase. Future macroeconomic data and central bank activity such as the Federal Reserve will likely determine the cryptocurrency market’s comeback.
Featured image from Pixabay, chart from TradingView
