The prospect of the United States approving a strategic cryptocurrency reserve is less than 50%, according to JPMorgan. Moreover, tokens such as XRP, Solana (SOL), and Cardano (ADA) would likely be excluded if such a reserve were to be approved. This assessment comes as the global cryptocurrency market faces downward pressure due to regulatory uncertainty and record outflows from investment funds.
JPMorgan estimates that the probability of the US approving a crypto reserve is below 50%. If approved, only Bitcoin (BTC) and Ethereum (ETH) would be included, with other altcoins being excluded due to their associated risks and volatility. The crypto market is experiencing significant pressure due to regulatory uncertainty and the massive exit of investment funds.
Low Probability of US Crypto Reserve Approval
The US-based international investment bank, JPMorgan, believes that the approval of a strategic cryptocurrency reserve in the United States has less than a 50% chance of success. This is largely due to the need for Congressional approval, as well as concerns over the volatility of the crypto market. In a recent report, Nikolaos Panigirtzoglou, JPMorgan’s global market strategy director, noted that while there has been a rebound in the market following a proposal by former President Donald Trump, analysts believe that Congress will not give the initiative the green light.
Despite the low expectations for success, JPMorgan warns that if a crypto reserve were to be approved, it would likely only include Bitcoin (BTC) and Ethereum (ETH), leaving out other cryptocurrencies like XRP, Solana (SOL), and Cardano (ADA). The inclusion of these altcoins would raise further concerns about regulatory risks and volatility, according to the analysts.
Prior Rejection of State-Backed Reserves and Central Bank Stances
At the state level, the US has already seen failures in attempts to create Bitcoin reserves. Montana, North Dakota, South Dakota, and Wyoming have rejected similar proposals in the past, citing financial risks and lack of legislative backing. Internationally, central banks have been skeptical about cryptocurrencies as a store of value. The Swiss National Bank and the National Bank of Poland have ruled out Bitcoin as a reserve asset, while authorities in Singapore have indicated that crypto assets do not fit into their long-term investment strategy.
The JPMorgan report also mentions that the European Central Bank (ECB) has been particularly critical of the idea of national Bitcoin reserves, reinforcing regulators’ perceptions about the lack of stability in the crypto market. However, in the US, state-level efforts to create Bitcoin reserves are gaining traction, especially after Trump’s presidency. It’s worth noting that Trump had launched the idea of a national digital currency reserve, starting with BTC, and assured that the priority is to make the country an international hub for the crypto sector.
Factors Maintaining Pressure on the Crypto Market
Uncertainty over the possible approval of a crypto reserve in the US has contributed to recent downward pressure on the market. JPMorgan analysts point out that the macroeconomic environment and record outflows from crypto funds are affecting investor confidence. BTC fell by almost 20% in February, accompanied by a $3.5 billion withdrawal from Bitcoin ETFs, the largest monthly outflow since their launch. The report also indicates that futures traders are unwinding positions, while operators have begun to short bet, adding further pressure on the price.
The cooling of interest in capital markets is also reflected in MicroStrategy’s latest $2 billion convertible bond. According to JPMorgan, the need for more favorable terms to attract investors suggests a possible weakening in institutional demand for cryptocurrencies. In general, analysts conclude that without a positive catalyst in the short term, crypto markets will likely remain under pressure in the coming months.
As the crypto market navigates these challenges, it’s essential for investors to stay informed and up-to-date on the latest developments. Regulatory uncertainty and market volatility can be significant obstacles, but they can also present opportunities for those who are prepared. By understanding the complex factors at play, investors can make more informed decisions and navigate the ever-changing landscape of the cryptocurrency market.