The crypto market correction has caught the attention of investors and analysts alike. According to recent reports from JPMorgan, this correction is primarily influenced by retail selling activities, particularly in bitcoin and ether ETFs.
Understanding the Crypto Market Correction
JPMorgan analysts reveal that the latest crypto market correction has been intensified by Bitcoin’s fall below an estimated production cost of $94,000. Interestingly, this downturn is largely attributed to retail investors offloading spot bitcoin and ether ETFs, rather than actions by crypto-native traders.
Retail Selling vs. Crypto-Native Traders
In October, the crypto market experienced a correction due to heavy deleveraging in perpetual futures by crypto-native investors. However, this trend has stabilized in November. Instead, retail investors have been the primary force behind the ongoing correction, as they have shown a preference for selling spot bitcoin and Ethereum ETFs.
This month alone, approximately $4 billion has been withdrawn from spot BTC and ETH ETFs, surpassing the record outflows seen in February. This behavior contrasts sharply with the inflows observed in equity ETFs, where retail investors have injected around $96 billion in November.
Retail Investors’ Divergent Strategies
The data indicates that retail investors continue to view crypto and equities as distinct investment categories. Despite both being risk assets, the significant divergence in investment patterns suggests that retail investors are not uniformly bearish on all risk assets. Instead, their activity in crypto ETFs has been limited to short periods, notably February, March, and now November.
JPMorgan analysts stress that the selling of crypto ETFs should not be misinterpreted as a broader bearish sentiment towards risk assets, including equities. The longstanding correlation between crypto markets and equities, particularly small-cap tech stocks, remains unchanged.
Speculative Retail Trading Trends
Interestingly, the most speculative retail traders, those active in call options or single-stock momentum, have reduced their activity in recent weeks. Data from the Options Clearing Corporation shows a decline in weekly call-option purchases by small retail accounts.
Despite this downtrend, the analysts note that it merely reverses the speculative surge from the previous month and does not alter the overall upward trend observed since 2023.
Overall, the analysts conclude that the ongoing crypto ETF selling should not be seen as a signal of broader risk-off behavior. Retail investors continue to aggressively purchase equities, indicating their ongoing interest in certain risk assets, albeit not in crypto for this particular month.
