JPMorgan report leak reveals warning of extreme Bitcoin price volatility as Ethereum crash adds to $ 100 billion crypto rout


Bitcoin hovered wildly through 2021, falling with the second largest cryptocurrency ethereum after huge races and dashed hopes that growing adoption by retail investors and institutions would bring stability to the markets of the crypto roller coaster.

The price of bitcoin is down about 50% from the peak in April which saw it more than double in the first three months of the year (subscribe now to Forbes’ CryptoAsset & Blockchain Advisor and beat the market). Ethereum fell further from its May high of over $ 4,000 per ether token, today falling an additional 5% and falling below $ 2,000 amid a cryptocurrency sell-off that has wiped out an estimated $ 100 billion of the combined crypto market in less than a week.

Now, Wall Street giant JPMorgan, after correctly calling the May cryptocurrency crash, has warned of El Salvador’s controversial plan to adopt bitcoin as legal tender, pointing to the low volume of bitcoin trading off major exchanges and its extreme price volatility as perhaps “a significant limitation on its potential as a medium of exchange.”

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“The daily payment activity in El Salvador would represent [around] 4% of the volume of recent on-chain transactions and more than 1% of the total value of tokens that have been transferred between wallets in the past year, “JPMorgan analysts wrote in a report released last week and seen by Bloomberg, adding a “significant and increasing fraction [of bitcoin is] held by low turnover portfolios. “

The report stated that bitcoin exchange volumes typically exceed $ 50 billion per day, but mostly occur on major crypto exchanges, with a large portion of bitcoin now considered to be stuck in illiquid entities and 90% of bitcoin not. not move for more than a year.

Salvadoran President Nayib Bukele announced his intention to make bitcoin legal tender in the country alongside the US dollar in early June at the Bitcoin 2021 conference in Miami. The plan was received with great fanfare, but it remains sketchy even after being rushed through the country’s Congress, and adopted days later with little scrutiny.

Bitcoin supporters, led by Bukele, claim that El Salvador’s formal adoption of bitcoin in early September will lower the cost of remittances and boost financial inclusion among the country’s unbanked.

However, JPMorgan researchers see bitcoin’s high volatility as a major challenge alongside the country’s official dollarization and warn that strong demand for bitcoin to US dollar conversions on the government’s bitcoin spending platform could “cannibalize liquidity. of the onshore dollar “.

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Meanwhile, bitcoin’s rival Ethereum is also grappling with mind-blowing volatility as the sell-off that began in May continues.

While Ethereum has seen a flood of adoption and attention this year thanks to the twin craze of decentralized finance (DeFi) and non-fungible tokens (NFT) – both built largely on the blockchain of Ethereum – The price of Ethereum has rocked even more wildly than bitcoin.

But despite its heavy losses in recent weeks, those who have invested and are working with the technology remain convinced that it can be successful.

“With ethereum, you are betting on adopting a protocol in the area of ​​decentralized finance and smart controls,” JP Theriot, managing director of New York-based digital currency platform Uphold, said in comments sent. by e-mail. “The genie is out of the bottle, and he’s not going back.”

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