Institutional investors are turning their focus to Ethereum due to “weak demand” for the market’s largest cryptocurrency, according to the investment bank.
According to sources, investment firm JP Morgan said on Wednesday that investors are looking to Ethereum futures rather than Bitcoin futures, indicating that there is now more interest in the second largest cryptocurrency among significant investors.
According to a Thursday Business Insider story citing a memo from the bank, this shift of interest is a “setback for Bitcoin.” The research noted that Bitcoin futures on the Chicago Mercantile Exchange (CME) traded below the price of Bitcoin this month.
This was purportedly due to “weak demand by institutional investors,” according to JP Morgan.
When investors put bets and trade contracts on the future price of bitcoin rather than the real commodity, this is referred to as bitcoin futures. In terms of cash invested, it’s a massive market with more interest than spot trading (when investors purchase and sell Bitcoin the cryptocurrency).
For example, the 24-hour spot trading volume at Binance, the world’s largest crypto exchange, is currently $23 billion. It is currently $65 billion in futures trading.
Most major cryptocurrencies have futures trading contracts, but the largest assets by market cap—Bitcoin and Ethereum—are the most popular contracts to trade.
This is considered as a smart way for regular investors to get into the crypto market without having to deal with buying and keeping actual cryptocurrency, which may be complicated and burdensome for them.
In an investor note, JP Morgan allegedly stated that the interest in Ethereum futures indicates a “healthier demand for Ethereum vs. Bitcoin by institutional investors,” alluding to large organizations—such as hedge funds—that have large sums of money to play with.
When there is a lot of demand for Bitcoin, futures tend to be more expensive than the cryptocurrency. According to CME data, this was not the case in September.
Instead, investors have been monitoring Ethereum since August, with the 21-day average Ethereum futures premium rising 1% more than the asset’s price, according to JP Morgan.
Despite this interest in futures, both cryptocurrencies are in trouble: Bitcoin is down 7% in the last week, trading at $44,840, and Ethereum is down 12%, trading at $3,152, according to CoinGecko data.