The recent downtrend in the cryptocurrency market appears to be nearing its end, as the latest research from JPMorgan suggests that most of the liquidation of long positions has been completed.
According to a report by Bloomberg, analysts from the US-based bank estimate that the “bulk of it is behind us” regarding the liquidation process. This prediction is based on the increasing interest in Bitcoin futures contracts on the Chicago Mercantile Exchange (CME), indicating that the selling trend could soon slow down.
Open interest, which refers to active futures contracts, serves as an indicator of market sentiment and the strength of the price trend. Analysts suggest that the decline in open interest for Bitcoin could signal a weakening of the current price trend.
The report also notes that cryptocurrency prices have been declining in recent weeks due to decreasing optimism about regulatory developments in the US. According to Cointelegraph Markets, as of August 28th, Bitcoin was trading around $25,905, marking an 11.6% decrease over the past 30 days.
Positive developments in the previous months had driven up Bitcoin’s price. Among these was a series of applications for the first-ever US exchange-traded funds (ETFs) related to Bitcoin spot prices. The list of players awaiting regulatory approval included BlackRock, Fidelity, ARK Invest, 21Shares, and others.
Another positive development was a partial victory for Ripple Labs against the US Securities and Exchange Commission (SEC). However, this optimism is gradually fading, noted the analysis, as traders await decisions on the Bitcoin ETFs and uncertainties arising from the SEC’s appeal against Ripple’s case.
According to JPMorgan’s team, this scenario contributes to a “new legal instability loop” for the cryptocurrency market, making it sensitive to future developments. External market conditions also play a role in the cryptocurrency market decline, including the increasing real yields in the US and concerns about China’s economic growth.