Bitcoin and cryptocurrency prices have struggled over the last month, with around $1 trillion wiped from the value of the combined crypto market since it peaked at around $2.5 trillion in mid-May.
The bitcoin price fell to just over $30,000 per bitcoin this week before rebounding thanks to El Salvador’s plans to adopt bitcoin as its official currency alongside the U.S. dollar. Elsewhere, the other top five cryptocurrencies by value—ethereum, Binance’s BNB, cardano, and dogecoin—have also lost ground, each falling between 5% and 10% this week.
Now, despite the bitcoin price bouncing back toward $40,000 over the last couple of days, analysts at Wall Street giant JPMorgan
“We believe that the return to backwardation in recent weeks has been a negative signal pointing to a bear market,” JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note that was first reported by financial newswire Bloomberg, warning the bitcoin price crash from over $50,000 per bitcoin in May is an “unusual development and a reflection of how weak bitcoin demand is at the moment from institutional investors.”
The analysts pointed to weakness in the bitcoin futures market they say echos the 2018 bear market that was branded crypto winter for its devastating effect on cryptocurrencies across the board.
The bitcoin and crypto price boom over recent months that’s seen the likes of ethereum, cardano, Binance’s BNB and even “joke” bitcoin rival dogecoin surge many thousands of percent has been driven by a combination of long-awaited institutional adoption and retail investor fear-of-missing-out (FOMO).
As traders and investors piled into these so-called “altcoins,” bitcoin’s crypto market dominance—a measure of how weighted the overall cryptocurrency market is toward bitcoin—has fallen to just over 40%, down from around 70% at the beginning of the year.
Bitcoin’s dominance may need to return to over 50% before the bull market returns, according to JPMorgan’s analysis. Bitcoin’s dominance dipped under 50% in late April for the first time since July 2018, according to crypto price data from CoinMarketCap.
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The sell-off, sending shockwaves through the wider cryptocurrency market and causing ethereum to lose half its value in just two weeks, was exacerbated by fears of a bitcoin and cryptocurrency crackdown in China.
However, some cryptocurrency market watchers think the bitcoin price may be “nearing a bottom.”
“When deep-diving into bitcoin’s market corrections, the -49% plunge in May marked the 6th biggest event of this kind, which could be seen as one of the largest monthly corrections in history,” Lukas Enzersdorfer-Konrad, chief operating officer at Austria-based crypto exchange Bitpanda, wrote in an emailed note.
“With that said, corrections of this magnitude are common and should be expected. Bitcoin finished the month down by 35% and is still struggling to find a new support zone. With the price down by almost 50% from its all-time-high, some bullish news suggests that bitcoin is nearing a bottom.”