JPMorgan analysts attribute the recent cryptocurrency price surge to individual traders’ impulsive actions rather than institutional investors or market fundamentals.
They observed a resurgence in retail interest in crypto during February, akin to trends in equities. The GMCI 30 Index, representing the top 30 cryptocurrencies, has risen by over 13% year-to-date.
Analyzing on-chain cumulative bitcoin flows, the analysts differentiated between small and large wallets, adjusting for inflows into new spot bitcoin exchange-traded funds to gauge retail impulses accurately.
The increasing popularity of AI and meme tokens also signifies retail involvement in crypto, with their market share rebounding in February.
Retail interest surged towards the end of last year, paralleling the momentum in equities during Q4 2023. Reports from brokerage firms like Block, PayPal, and Robinhood corroborate this surge, as they offer crypto trading and custody services to retail clients.
The recent retail activity could be attributed to three key upcoming crypto catalysts: the Bitcoin halving event, the impending major Ethereum network upgrade (Dencun), and the potential approval of spot Ethereum ETFs in the U.S. in May.
However, the analysts caution that the first two catalysts are already largely priced in, while the likelihood of Ethereum ETF approval in May is uncertain, standing at 50%.
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