According to a study of open interest in bitcoin (BTC) futures on the Chicago Mercantile Exchange (CME), the unwinding of long positions appears to be nearing its conclusion rather than just getting started, according to a research paper released on Thursday by JPMorgan (JPM).The total amount of derivative contracts, such as options or futures, that are still in effect but have not yet been settled is referred to as open interest.
“As a result we see limited downside for crypto markets over the near term,” analysts led by Nikolaos Panigirtzoglou wrote.
The correction in crypto markets in August, “which reversed the post Securities and Exchange Commission (SEC) versus Ripple court decision rally” can be partly credited to the “broader correction in risk assets such as equities and in particular tech, which in turn appears to have been induced by frothy positioning in tech, higher U.S. real yields and growth concerns about China,” the report said.
According to JPMorgan, the revelation that Elon Musk’s SpaceX wrote off its bitcoin stake in the prior quarter served as a “additional catalyst for the correction in crypto markets.”
“These news caught up investors with an overhang of long positions,” the note said.
According to the source, the SEC is challenging the district court’s decision in the Ripple case, and because the resolution of the appeal isn’t expected until next year, this might lead to “new legal uncertainty for crypto markets.”