JPMorgan: Bitcoin Liquidation Activity to End This Month, Market to See Rebound in August

JPMorgan and Bitfinex have both issued reports stating that with the conclusion of liquidation activities and selling by short-term holders, the market is approaching a bottom and is expected to rebound in August.

JPMorgan: Crypto Market to Rebound in August

CoinDesk cited a JPMorgan research report forecasting a rebound in the crypto market starting in August, with liquidations expected to be completed by the end of July.

Due to a decrease in bitcoin reserves on major exchanges over the past month, JPMorgan revised its prediction for net inflows into the crypto market from $12 billion to $8 billion for the year to date.

The report mentioned that the decrease in bitcoin reserves could be attributed to bitcoin liquidations by Gemini and creditors of the bankrupt exchange Mt. Gox, as well as bitcoin sales by the German government.

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Is Bitcoin Overvalued Compared to Gold?

The analyst team led by Nikolaos Panigirtzoglou at JPMorgan wrote in the report:

The lower forecast for net flows is mainly due to the decrease in bitcoin reserves over the past month. We are skeptical about the possibility of the previously estimated $12 billion net inflows continuing throughout the year, as the production cost of bitcoin remains relatively high compared to the price of gold.

The report emphasized that with the end of liquidation activities, the crypto market is expected to start recovering in August.

Bitfinex: Short-Term Holders Done Selling

Bitfinex analysts also believe that the market is nearing a bottom.

Quoting data from the derivatives market, they pointed out that bitcoin price volatility has begun to decrease as the spread between "implied volatility" and "historical volatility" has narrowed by nearly 90%, indicating traders expect bitcoin prices to stabilize within a range.

The analysts noted:

The selling pressure from short-term holders may be nearing an end. We observe that the spend output profit ratio (SOPR) for short-term holders is 0.97, indicating short-term holders are selling at a loss, a situation that has occurred in the past as well. With the easing of selling pressure, prices are poised for a rebound.

The Spent Output Profit Ratio (SOPR) is used to measure the realized profits and trends of bitcoin. A SOPR value greater than 1 indicates realized profits, less than 1 indicates realized losses, and equal to 1 indicates breakeven. When SOPR is too low, it may indicate an oversold market with potential for an uptrend.