JPMorgan analysts headed by global market strategist Nikolaos Panigirtzoglou communicated to customers on Thursday that the Bitcoin market has reverted to backwardation, a term used when spot price is higher than the futures price.
Bitcoin futures reverted into backwardation for the very first time in three years, according to the analysts, following the recent slump in crypto markets.
Despite a significant market comeback over the previous two days, as per the analysts, Bitcoin futures backwardation should be considered as a bad indication for BTC price, with Bitcoin topping $37,500 on Thursday.
The experts emphasized that the Bitcoin futures graph was in backwardation throughout the major portion of 2018, a year in which Bitcoin fell 74% from its then-historic high of $20,000 in December 2017:
“In recent times, we feel the reversal to backwardation has been a bearish indication pointing to a bear market. The movement in Bitcoin futures into backwardation, in our perspective, is a negative indicator that echoes 2018.”
JPMorgan focused its newest research on a 21-day moving average of the second Bitcoin futures spread over spot prices. The researchers saw a “interesting development” that “reflects how poor Bitcoin appetite is right now from financial institutions” who trade futures and options on the Chicago Mercantile Exchange.
Another worrying trend, according to the researchers, is Bitcoin’s declining percentage of the whole crypto market value. As reported earlier by Cointelegraph, Bitcoin’s market share on cryptocurrency exchanges fell below 40% in final May, indicating the lowest level in three years after rising above 70% in January.
As per statistics from CoinMarketCap, Bitcoin’s share of the whole crypto market capitalization is 43 percent at the time of posting, representing $682 billion out of the entire crypto market value of $1.6 trillion. Some experts, such as Stack Funds, anticipate that Bitcoin’s dominance would retest prior highs in the near future.