Many investors are now shying away from bitcoin and are starting to invest in Ethereum. JPMorgan analysts said that this became the trend because expectations for the most prominent cryptocurrency have softened.
Bitcoin trading below the price of an actual bitcoin
The expectations for bitcoin started to soften this month after it had traded below the price of an actual bitcoin. JPMorgan Analysts wrote, “This is a setback for bitcoin and a reflection of weak demand by institutional investors that tend to use regulated CME futures contracts to gain exposure to bitcoin.” The prices for bitcoin fell ten percent in the last month, Business Insider reported.
In the past, under healthy demand, the trade was at a premium to actual bitcoin. This happens because there is a high bitcoin storage cost, and it yields passive crypto investing that pushes up the prices.
Pivoting towards Ethereum
Institutional investors started to pivot towards Ethereum last month. According to JPMorgan analysts, the 21-day average Ethereum premium rose to one percent over actual ether prices. The analysts noted, “This points to much healthier demand for Ethereum vs. bitcoin by institutional investors.”
China cracks down on cryptocurrencies
Although many institutional investors are pivoting towards Ethereum, there was a decrease in the price of both bitcoin and Ethereum as China continues to crack down on cryptocurrencies. The decrease came after the People’s Bank of China said that all crypto-related activities are illegal. Such activities include services offering trading, order matching, or derivatives for virtual currencies. Overseas exchanges are likewise illegal.
The Chinese government has been cracking down hard on cryptocurrencies this year. Many miners had to take down their equipment, thus there was a sharp slump in bitcoin’s processing power. Further, the People’s Bank of China banned banks and non-bank payment institutions from providing services related to virtual currency.