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(Bloomberg) –
The strongest two-day Bitcoin rally in a fortnight has yet to dispel doubts about the vulnerability of virtual currencies following the Mays rout.
The cryptocurrency jumped 9% in two days and was trading at $ 36,740 at 7:05 am in London on Thursday. While the momentum may encourage the bulls, a team from JPMorgan Chase & Co. said the backlash in the futures market – where the spot price is higher than the futures price – is a reason for caution.
We believe the return to the backlash in recent weeks has been a negative signal pointing to a bear market, JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note. They added that the relatively depressed share of Bitcoins in the total value of the crypto market is another worrying trend.
Traders are waiting for the next catalyst to push Bitcoin from a range of $ 30,000 to $ 40,000 that has been in place since the collapse of a record high of nearly $ 65,000 in April. Public criticism of the energy needs of digital currencies by tycoon Elon Musk and a Chinese regulatory crackdown are among the obstacles. The bulls had some momentum on Wednesday after El Salvador made Bitcoin legal tender.
Virtual currency needs to hit $ 39,460 and the top of the recent range to really pull in, but we’ll need to see a pause here to make the bulls feel out of this period of vulnerability, Chris Weston, head of research at Pepperstone Financial Pty , wrote in a note Thursday.
JPMorgan’s June 9 analysis looked at the 21-day moving average of the 2nd Bitcoin futures contract spread over spot prices. The offset this has shown is an unusual development and reflects the current weakness in demand for Bitcoin from institutional investors who use contracts listed on the Chicago Mercantile Exchange.
The Bitcoin futures curve was offsetting for most of 2018, a year when the cryptocurrency fell 74% after a dramatic boom, JPMorgan said.
Meanwhile, Bitcoin’s share of the overall crypto market value is currently 42%, down from around 70% at the start of the year, according to data from the CoinGecko tracker. For some analysts, this is in part a sign of a scum from retail investors raising other coins.
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Bitcoin share may need to exceed 50% to make it easier to say the current bear market is over, JPMorgan strategists said.
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