Bitcoin’s recent tumble cleared some speculative “froth” but further declines remain possible, according to JPMorgan Chase & Co.
Momentum traders such as commodity trading advisors and other quantitative funds likely played a big role in the slide by unwinding long Bitcoin futures positions, strategists led by Nikolaos Panigirtzoglou wrote in a Nov. 27 note.
“The previous froth in momentum traders’ positioning has been cleared to a large extent,” they wrote, while adding momentum signals will continue to deteriorate unless Bitcoin recovers quickly.
The largest cryptocurrency slid as much as 14% on Nov. 26, not long after nearing its December 2017 record high of $19,511. Profit-taking and concern about new regulations were among the factors cited for the slump, which revived questions about whether digital assets are in an unsustainable bubble.