The multinational investment bank and financial services firm JP Morgan reportedly predicts that the further upside in crypto is likely to be limited as stablecoin ownership continues to go down.
Thus, as per reports, the bank said that current signs of visible recovery seen in the crypto market after a month’s long bear market could start dwindling soon.
On Wednesday, the bank noted the recent sweep in bitcoin and ether, which started growing in early March after Russia witnessed crushing economic sanctions from Western countries.
JPMorgan expounded that these sanctions led to expectations that cryptocurrencies will be used more immensely in the future to evade the traditional banking system given its ‘decentralized’ nature.
However, as stablecoins witnessed a swift decline in total share of the overall crypto market capital, the rebound in the crypto is certainly fading fast and might drop soon.
With the understanding that stablecoins stand for dry powder (a cash like liquidity), JPMorgan said, “We had argued previously that the high [of] almost 10% share of stablecoins in total crypto market cap pointed to further upside for crypto markets at the time.”
When tracing the trajectory of Bitcoin and Ether since February, one can notice the surge of more than 30%. The surge is certainly amidst a combination of short covering and bitcoin fund inflows which ultimately helped maintain its recovery, with a massive $210 million flowing into the Purpose Bitcoin ETF since March 7, as per the bank.
JPMorgan said, “Short covering has been more intense for ethereum than bitcoin in recent weeks… this short covering helped to push our position proxy based on CME ethereum futures to overbought territory.”
However, the bank also maintained that stablecoins’ share of the total crypto market capital has since fallen to 7%, thus, pulling it back to its trend since 2020.
JPMorgan reiterates that the share of stablecoins in total crypto market capital no longer looks excessive and so, it is believed that any further upside for crypto markets from now on would likely be more limited.
Many financial services have been exploring crypto prospects as crypto grows to integrate into the traditional financial market. Recently, Citi predicted that the TAM for the metaverse economy could be between $8 trillion and $13 trillion by 2030.