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According to JPMorgan Chase’s annual e-Trading survey, approximately 78% of institutional traders do not plan to gain exposure to cryptocurrencies in the next five years, while only 12% plan to trade them.
This is despite the current positive sentiment across the space. For context, bitcoin (BTC-USD) increased 165% in 2023, mainly due to speculation in the now approved bitcoin spot exchange-traded funds. The highest-profile token pared a notable portion of gains following last month’s ETF approval, eventually finding a technical support level at around $40,000.
From there, the coin reaccelerated to $47.3K as of Friday afternoon, trending towards higher lows along the way. The swing comes amid concerns for US regional banks, stemming from New York Community Bancorp’s (NYCB) fourth-quarter earnings shock. During the regional banking turmoil in March, bitcoin rallied as investors, who lost faith in the traditional banking sector, turned to the token as a hedge against uncertain times.
Cryptocurrencies, however, appear to be too volatile for institutional traders’ tastes. After the huge bull run in 2021, the cryptocurrency industry suffered in 2022 from a series of failures and a broader risk-off sentiment in financial markets. A furious bear market ensued, with bitcoin (BTC-USD) and ether (ETH-USD) falling 64.9% and 68.7%, respectively.
However, of the 4,010 global institutional traders surveyed by JPMorgan, 9% said they are currently engaged in the cryptocurrency sector, up from 8% in 2023. The increase, while slight, could be fueled by growing interest from traditional financial firms in the field. BlackRock (BLK), Invesco (IVZ), Wisdomtree (WT) and Fidelity were among the financial giants that gained regulatory approval for their spot bitcoin ETFs.
While the price of bitcoin (BTC-USD) is difficult to predict, SA analyst Kennan Mell outlined several factors that could contribute to a continued rally, including the upcoming halving event (expected in April), potential cuts interest rates this year from the Federal Reserve, a potential spot ETF on Ethereum (ETH-USD), and overall positive investor sentiment.
Because of such developments, “Bitcoin’s recovery from this sell-off is expected to be faster than previous sell-offs,” he said in late January.
Interestingly, participants in the JP Morgan survey appeared less optimistic about blockchain technology in 2024 compared to the previous year. Blockchain and distributed ledger technology dropped in ranking performance to 7% from 12% in 2023. Instead, artificial intelligence and machine learning are the two technologies expected to have the biggest impact on trading over the next three years. Some 61% of respondents believe artificial intelligence and machine learning would lead, up from 53% last year.