Crypto markets face downside risk as institutional interest in CME bitcoin and ether futures declines, JPMorgan analysts warned. The total cryptocurrency market capitalization has dropped 15% from its peak of $3.72 trillion in December to $3.17 trillion, a sharp correction that signals weaker demand from institutional investors.
JPMorgan’s latest report, led by managing director Nikolaos Panigirtzoglou, highlights concerns over CME bitcoin and ether futures approaching “backwardation,” a condition where futures prices trade below spot prices. The analysts compared this development to similar trends in June and July of the previous year, which coincided with price declines.
“This is a negative development and indicative of demand weakness by those institutional investors that use regulated CME futures contracts to gain exposure into these two cryptocurrencies,” the analysts wrote. When demand is strong, futures typically trade at a premium to spot prices, known as “contango,” often exceeding 10% annually. However, weakening demand has reversed this trend.
Profit-Taking and Momentum Decay
JPMorgan analysts attribute the slowdown in institutional demand to two primary factors. First, some investors appear to be taking profits due to the absence of immediate bullish catalysts. With no major crypto-related regulatory or policy changes expected from the U.S. administration before mid-year, investors remain in a “wait-and-see” mode.
Second, momentum-driven funds, including commodity trading advisors, have been reducing their exposure. “Both bitcoin and ethereum momentum signals have been downshifting over the past couple of months, with the ethereum momentum signal having shifted already into negative territory,” the analysts noted. A weakening momentum signal suggests that fewer investors are willing to buy in at current levels, further suppressing demand.
Broader Market Reversals and Global Shifts
JPMorgan’s findings align with a broader shift in global financial markets. The firm noted that from May 2023 to late 2024, U.S. assets outperformed their global counterparts, driven by a stronger dollar, tech stock dominance, and lagging U.S. Treasury bonds. However, this trend has reversed since early 2025, with non-U.S. stock markets, particularly in Europe and China, outpacing the U.S.
European stocks, in particular, have seen rising investor inflows, while U.S. equity inflows have declined. JPMorgan’s Economic Activity Surprise Index (EASI) further indicates that European macroeconomic data has recently outperformed U.S. data, suggesting a stronger-than-expected recovery in Europe while uncertainties cloud U.S. economic growth.
The shift in investor sentiment extends beyond traditional markets. Optimism around a potential Russia-Ukraine ceasefire has boosted European equities, while concerns over global economic uncertainty have weighed on risk assets, including cryptocurrencies. As bitcoin and ether futures slip toward backwardation, the market may face further turbulence in the near term.
