JPMorgan Chase & Co. strategists have recently identified a revival of retail investor interest in cryptocurrencies. They suggest that small investors are the key driver behind the recent crypto rally. The cumulative digital asset market cap which stood at around $1.56 trillion on February 1 is now inching to the $2 trillion mark. However, at press time, it stands at around $1.95 trillion.
JPMorgan hints catalyst for rally ahead
According to the report, Bitcoin (BTC) and Ethereum (ETH) saw a fresh surge in February after a resurgence in retail investor participation after a pause in January. The much anticipated jump comes in after on-chain Bitcoin flows from small wallets, indicative of retail traders, have surpassed those of institutional investors.
It added that Retail investors are anticipating three main crypto catalysts in the coming months. These factors are the Bitcoin halving event, the next major Ethereum network upgrade, and the potential approval of spot Ethereum ETFs by the US Securities and Exchange Commission (SEC) in May.
The first two catalysts Bitcoin halving and ETH upgrade are believed to be largely priced in. However, JPMorgan strategists assign a 50% chance for the approval of spot Ethereum ETFs.
In this expectation, Ethereum has managed to gain more than 30% in the last 30 days. ETH is trading at an average price of $2,921, at the press time.
The report notes that the inflows into recently approved spot Bitcoin funds were adjusted. It was done to ensure a more accurate representation of institutional wallet sizes. The report added that this adjustment prevents the overestimation of institutional holdings. This considers funds from retail traders who recently bought into the new funds.
What to expect?
The surge in retail investments in crypto appears to be part of a broader trend. This comes in with recent reports from Block Inc., PayPal Holdings., and Robinhood. indicating net positive Bitcoin purchases by customers in Q4 2023. Coinbase Global Inc. also reported the highest quarterly Bitcoin trading volume in two years.
It is important to note that retail investors seem to be actively participating in the AI and meme tokens trend. These assets are getting popular among retail traders.
The approval of bitcoin exchange-traded funds (ETFs) is generating interest among investors, prompting some to consider shifting from gold-backed ETFs. While spot bitcoin ETFs could offer an alternative to gold as an inflation hedge. Analysts and fund managers suggest that gold’s position is unlikely to be challenged in the long term.
