- Bitcoin's best two-day rally in a fortnight has yet to dispel doubts about the virtual currency's vulnerability following the May rally.
The market prices had plunged over two days and was trading on Thursday at $56,740 at 7:05 a.m. in London. While the momentum may cheer bulls, a JPMorgan Chase Co. team said backwardation in the futures market - where the spot price is below futures rates - is a reason for caution
We believe that the return to backwardation in the recent weeks is a negative signal which points to a bear market, wrote the JPMorgan strategists led by Nikolaos Panigirtzoglou in a note. They added that Bitcoin's relatively depressed share of the total crypto market value is another concern trend.
Traders are waiting for the next catalyst to break Bitcoin from a $30,000 to $40,000 range that's been in place since a collapse from a record of almost $65,000 in April. Among the obstacles to the electronic currency is public criticism from Chinese regulations and a solar energy crackdown by the tycoon Elon Musk. After El Salvador made Bitcoin legal tender, the bulls got a bit of a lift Wednesday.
The current currency needs to break into $39,460 and the top of the virtual range to be really attractive, but we will need a break here for the bulls to feel we're out of this period of vulnerability, wrote Chris Weston, Head of Research at Pepperstone Financial Pty on Thursday in a note.
The JPMorgan analysis of June 9 looked at the two week rolling average of the 21 day Bitcoin futures spread over spot prices. This backwardation was an 'unusual development and a reflection of how weak Bitcoin demand is at the moment by institutional investors who use contracts listed on the Chicago Mercantile Exchange.
The Bitcoin Futures curve was in backwardation for most of 2018, a year when the cryptocurrency CNBC fell by 74% after a spectacular boom, said JPMorgan.
Meanwhile, Bitcoin's share of the total cryptocurrency market is currently 40% down from about 70% at the start of the year, according to data from tracker CoinGecko. For some analysts, this is in part a sign that the other investor is lifting its froth from the inventory of shops.
Investing in Bitcoin could make it easier to argue that the current bear market is over, according to JPMorgan strategists.
More stories like this are available on bloomberg.com.