According to a research report from JPMorgan (JPM) on Thursday, analysis of open interest in Chicago Mercantile Exchange’s (CME) bitcoin (BTC) futures suggests that the unwinding of long positions is in its end phase rather than its beginning. Open interest refers to the total number of outstanding derivative contracts, such as options or futures, that have not been settled. “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 attributed to a broader correction in risk assets such as equities and tech, which was induced by “frothy positioning in tech, higher U.S. real yields, and growth concerns about China,” the report said. Additionally, news of Elon Musk’s SpaceX writing off its bitcoin holding in the previous quarter acted as an “additional catalyst for the correction in crypto markets.” The SEC is appealing against the district court’s ruling in the Ripple case and with the outcome of the appeal not expected until next year, this could induce a “new round of legal uncertainty for crypto markets,” the report added.