JPMorgan pointed out that the Bitcoin futures curve has been down for most of 2018, when BTC lost 74% of its value.
Cryptocurrency market analysts at JPMorgan pointed out that the difference between Bitcoin (BTC) spot prices and BTC futures prices is a potential bearish sign for the market.
JPMorgan analysts, led by global market strategist Nikolaos Panigirtzoglou, wrote in a note to clients Thursday that the Bitcoin market is turning backwards – a situation where the spot price is above futures prices. Analysts said that last month’s correction in the crypto markets saw Bitcoin futures go backwards for the first time since 2018.
According to strategists, Bitcoin futures should be seen as a negative sign for BTC price despite the massive rebound in the market over the past two days and Bitcoin hitting $37,500 on Thursday. Analysts highlighted that the Bitcoin futures curve has been going backwards for most of 2018, a year where Bitcoin fell 74% after hitting its then-historic high of $20,000 in late 2017:
We believe that the reversal in recent weeks is a negative signal pointing to a bear market […] In our view, the move to decline in Bitcoin futures is a bearish signal reflecting 2018.
In the latest analysis, JPMorgan specifically looked at the 21-day moving average of the second Bitcoin futures spread over spot prices. Analysts have observed that trading futures contracts on the Chicago Mercantile Exchange is an “unusual development and a reflection of how weak demand for Bitcoin from institutional investors is at the moment.”
Analysts also noted that Bitcoin’s weak share in the total crypto market cap is another related trend. Bitcoin dominance in crypto markets dropped to 40% at the end of May, marking the lowest share in the last three years after climbing over 70% this January.
At the time of writing, Bitcoin has 43% of the total crypto market capitalization and accounts for $682 billion in total crypto market capitalization of $1.6 trillion, according to data from CoinMarketCap. Some analysts, such as crypto index provider Stack Funds, believe that BTC dominance could retest previous highs in the short term.