JPMorgan skeptical $12 billion year-to-date crypto inflows will continue

Current high bitcoin prices, relative to its production cost or relative to gold, raise doubts about the sustainability of the $12 billion year-to-date inflow into crypto assets, according to JPMorgan analysts.

So far this year, the crypto market has seen substantial inflows driven by spot bitcoin exchange-traded funds, but JPMorgan analysts led by Nikolaos Panigirtzoglou said in a report on Wednesday whether this pace will continue into the rest of the year remains uncertain.

Spot bitcoin ETFs have attracted $16 billion in inflows year-to-date, and adding the flow impulse implied by CME futures and fundraising by crypto venture capital funds, total inflows into crypto have reached $25 billion year-to-date, the analysts said. However, not all of this represents new money entering the market, according to the analysts.

Many investors have likely shifted from crypto wallets on exchanges to spot bitcoin ETFs due to cost-effectiveness, liquidity and regulatory benefits, the analysts said. This shift is evident in the decrease of bitcoin reserves on exchanges by 220,000 bitcoins or $13 billion since the ETFs launch in January, the analysts said, citing data from CryptoQuant. Adjusting for this shift, the analysts said the net inflow into crypto assets stands at about $12 billion year-to-date.

If the current trend continues, it will result in an annualized net inflow of around $26 billion. However, the analysts are skeptical about this.

"Given how high bitcoin prices are relative to its production cost or relative to gold, we are skeptical that the YTD pace of $12bn will continue into the remainder of the year," the JPMorgan analysts said in the report.

Last month, the analysts revised their central estimate of bitcoin production cost to $45,000 from the previous $42,000 projection.

Meanwhile, the current bitcoin price is around $67,300, according to The Block's bitcoin price page.