Bitcoin suffers worst week in months amid regulation fears

Bloomberg

Bitcoin Return to $40,000 in Doubt as Grayscale Fund Flows Slow

(Bloomberg) — Cryptocurrency enthusiasts counting on Bitcoin to bounce back above the $40,000 level face a challenge due to faltering demand for the biggest fund tracking the digital asset, according to JPMorgan Chase & Co.The pace of flows into the $20 billion Grayscale Bitcoin Trust “appears to have peakedâ€� based on four-week rolling averages, JPMorgan strategists led by Nikolaos Panigirtzoglou said in a note Friday. The fund slid 22% over the past two weeks through Jan. 22, outpacing a 17% drop in Bitcoin in the same period.Read: Biggest Crypto Fund’s 40% Premium Evaporates During Meltdown“At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to break out above $40,000,â€� the strategists said. They added that the “risk is that momentum traders will continue to unwind Bitcoin futures positions.â€�Bitcoin’s red-hot rally lost momentum after the largest cryptocurrency reached a peak of almost $42,000 on Jan. 8. Proponents argue institutional interest has helped bolster Bitcoin’s use as a hedge against dollar weakness and inflation, while skeptics maintain the latest surge is yet another speculative bubble, akin to the 2017 mania that preceded a rapid collapse.“The near-term balance of risks is still skewed to the downside,â€� the JPMorgan strategists said.In a separate analysis, Adam James with OKEx Insights found at least some long-term Bitcoin holders — so-called “whalesâ€� — and miners likely sold to institutional investors during the 2020 rally, as the average age of coins traded rose starting in October and has remained elevated since.“Old-school Bitcoiners sold some of their old bags to new institutional buyers with extremely large new bags to fill,â€� James wrote. OKEx Insights is affiliated with crypto exchange OKEx.Bitcoin advanced about 2% to $32,700 as of 11:43 a.m. in Tokyo on Monday. The digital coin is still sitting on a gain of some 260% over the past year, despite shedding around $10,000 from this month’s all-time high.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.