The recent surge in cryptocurrency prices is primarily driven by impulsive decisions of retail traders rather than institutional investors or fundamental market factors, according to The Block, citing analysts from JPMorgan.
“As with stocks, we see that retail momentum in the context of cryptocurrencies emerged in February. This likely triggered the strong rally this month,” noted Nikolaos Panigirtzoglou, an expert from the financial holding.
The GMCI 30 index, reflecting the dynamics of the top 30 digital assets, has risen by more than 13% since the beginning of the year.
According to analysts, another indicator of retail interest in cryptocurrencies is the popularity of meme tokens and coins directly or indirectly linked to artificial intelligence. The share of such assets in the total market capitalization increased in February.
JPMorgan also noted a revival among users of platforms like Block, PayPal, Robinhood, and Coinbase, continuing since the fourth quarter of 2022. Experts attribute the recent surge in retail trading to three main catalysts:
- the upcoming Bitcoin halving;
- the anticipated major Dencun upgrade in the Ethereum network in March;
- the prospects of approval for an ETF based on the second-largest cryptocurrency by market capitalization.
In their view, the first two factors are already “largely priced in” by asset prices. Meanwhile, the likelihood of launching new financial products based on Ethereum is only 50%.
Previously, JPMorgan experts found that Bitcoin ETFs from BlackRock and Fidelity have become more liquid than GBTC.