JPMorgan Analyst: Institutional investors' demand for Bitcoin is weak, buying ETH is better than buying BTC

The financial services institution JP Morgan mentioned in a report on Wednesday, the 22nd, that the investment preferences of large financial institutions towards BTC and ETH are changing. As the Ethereum ecosystem continues to expand, BTC no longer seems to be the top choice for these large investors when investing in cryptocurrencies.

Futures Spot Price Spread

JP Morgan's report primarily compares the 21-day moving average spread between the futures prices and spot prices of BTC and ETH on the CME Chicago Mercantile Exchange to assess the market conditions. When the demand for Bitcoin futures is not particularly weak, the spread between Bitcoin futures and spot prices is usually positive, meaning that Bitcoin futures prices are higher than Bitcoin spot prices. This is because there is a consensus in the market that Bitcoin's future price will gradually rise, believing that the price of Bitcoin will be higher in the coming months. The spread between futures and spot prices can be understood as the market's optimism about future trends.

This phenomenon is also reflected in the lending business in the crypto industry, where investors lending out US dollar stablecoins in the crypto market typically receive an annualized return of 5-10%. Compared to traditional financial industries, the extremely high "risk-free rate" in the crypto industry reflects the demand for funds in the market and market confidence. Borrowers may consider that even though they need to pay nearly a 10% interest rate annually, it may be insignificant compared to the potential increase in their future assets.

Institutional Investors Prefer ETH Over BTC

However, recent data shows a weakening demand for Bitcoin futures in the market, with the futures spot price spread turning from positive to negative. This is the first time since the market sentiment was low in May to July this year that a situation of spot premium has reappeared. CME's cryptocurrency futures products, due to their regulated nature, are currently the preferred way for large institutional investors to obtain positions in cryptocurrencies. According to the data, JP Morgan analysts stated:

We believe that the return to a negative spread in September is a negative signal, indicating weak demand from institutional investors for Bitcoin.

From this data, it can also be seen that although Bitcoin futures data shows a negative spread, the futures spot price spread for ETH has still reached approximately 1%, indicating that the market seems to be more optimistic about the future trend of ETH compared to Bitcoin.

In addition, the report also provides another set of data on the open interest contracts for BTC and ETH futures, showing that since the end of July this year, ETH has been steadily increasing in this data, while BTC has been gradually declining. Analysts stated:

This indicates that institutional investors have a much healthier demand for ETH compared to BTC.