JPMorgan Flags Crypto Market Risks; Bitcoin, Ether Demand Weak

• JPMorgan warns of downside risk as weakened demand for Bitcoin and Ether futures grows.
• Arthur Hayes predicts Bitcoin could fall to $70,000-$75,000 before a potential rally.
• Capital inflows into Bitcoin and Ethereum have dropped over 30% in the past month.

JPMorgan analysts have expressed concerns about the crypto markets downside risks. They point to weakened demand for Bitcoin and Ether futures.

This comes after a market correction, with the total crypto market cap falling 15% from its peak of $3.72 trillion on December 17 to about $3.17 trillion. The drop has pushed the futures market into “backwardation.” This is when futures prices fall below spot prices, and it can signal further declines.

???? JPMorgans latest report states that CME Bitcoin and Ethereum futures are nearing “backwardation,” signaling weakened institutional demand and posing downside risks to the crypto market.

Key reasons include:

1. A lack of positive catalysts leading some institutions to take…

Weakening Bitcoin & Ether Demand Fuels Concern

JPMorgans report, from managing director Nikolaos Panigirtzoglou, explains that strong demand usually leads to futures prices being higher than spot prices.

This premium often goes above 10% per year because of high risk-free rates in the crypto market, where USD yields are between 5% and 10% annually.

Related: Crypto Recovery in Full Swing: $6 Billion Inflow Reverses Early February Selloff

However, as market demand for Bitcoin and Ether gets weaker, these premiums have vanished. Rates have fallen below spot prices. This mirrors trends seen last June and July and suggests the market may continue to face downward pressure.

Hayes Predicts Bitcoin Drop Before Potential Rally

Adding to these concerns, former BitMEX CEO Arthur Hayes has predicted that Bitcoin could drop to $70,000-$75,000 before another rally. He thinks economic factors, like central banks possibly restarting quantitative easing, could cause this decline.

Hayes also mentioned liquidity issues facing the U.S. Treasurys general account as a major factor in a potential market downturn. This is especially true in the first quarter and could further hurt investor sentiment.

Deteriorating Investor Sentiment Amid External Events

This downbeat outlook is made worse by a drop in capital flowing into Bitcoin and Ethereum. Analyst Ali Martinez revealed that these inflows have decreased by over 30% in the last month, falling from $45 billion to $30 billion.

Additionally, some crypto community members are unhappy with the lack of progress on the Strategic Bitcoin Reserve initiative under the Trump administration. This also hurts investor confidence.

Related: Bitcoin Price Dips Again—What Hayes Thinks Will Happen Next

This negative feeling is made stronger by the recent LIBRA meme coin rug pull. Traders reportedly lost over $286 million in that scam, which reduced liquidity across the market.