As the crypto market has continued to enjoy surges in recent times, a recent report cites that happiness is short-lived. According to a recent report from the Bank of America (BoA), there is limited upside for cryptocurrency markets in the near term.
In a research report released by the BoA, analysts Alkesh Shah and Andrew Moss have counted on several factors that are going to end the crypto market’s surging trail. As stated in the report:
Low conviction, limited catalysts, and outperformance year-to-date leave the digital asset sector stuck in a trading range with a challenging macro backdrop likely capping digital assets upside.
Further, the bank’s report comments on the investors’ behavior in recent times. It says that conversations with clients suggest that hedge funds are returning to token trading, “with momentum strategies likely benefitting to some extent from heightened volatility due to declining trading volumes.”
Momentum investing is when investors buy assets that are rising and sell them when they appear to have peaked, using volatility to identify buying opportunities in short-term uptrends and then selling when momentum appears to be waning.
Towards the end, the BoA analysts say that they are expecting cryptocurrency trading volumes to remain subdued, with retail investors remaining on the sidelines. Traditional finance (TradFi) companies and tech firms continue to build blockchain applications focused on tokenizing demand deposits, repo settlements, and bond issuance.
Notably, the crypto market, especially Bitcoin has continued to remain comparatively stable in recent times. According to Glassnode, the BTC price range i.e. the difference between the high and the low reached in the seven days to May 21, was 3.4% which has been the lowest in three years. However, analysts suggest that the tables are going to turn soon and the volatility will experience a surge in the times ahead.
In recent times, the BoA has been relatively more active in studying the trends and patterns prevailing over the sector. In April, right after Bitcoin passed the $30,000 mark, the bank published a report revealing its analysis and predictions for the sector.
At that time, a net $368 million of Bitcoin was sent to personal wallets in the week through April 4. The financial strategists explained that the trend of moving tokens from crypto platforms to their personal wallets typically means that investors are looking to hold them suggesting a waning selling pressure.