Is the Crypto Selloff Nearing a Bottom? A JPMorgan-Backed Investment Case for Strategic Reentry

The crypto market's prolonged selloff in late 2025 has sparked intense debate over whether the downturn is nearing a bottom. JPMorgan's recent analysis, however, suggests that stabilization is emerging across key metrics, including ETF flows, perpetual futures positioning, and CME Bitcoin futures data. These indicators point to a potential inflection point, offering a compelling case for strategic reentry into the asset class.

Flow Data: From Forced Reduction to Tactical Rotation

JPMorgan analysts highlight a critical shift in ETF flows for Bitcoin (BTC) and Ethereum (ETH). After record outflows of $235 billion in December 2025, driven by de-risking following MSCI's October index exclusion announcement, flows began stabilizing in January 2026. By early 2026, U.S. spot Bitcoin ETFs exhibited a "two-way" dynamic, with both inflows and outflows observed- a sign of tactical rotation rather than forced liquidation. This shift correlates with tighter intraday price ranges and improved bid support in perpetual funding rates, suggesting reduced selling pressure.

The stabilization is further reinforced by MSCI's February 2026 decision to retain crypto treasury companies in its global equity benchmarks. This move mitigated the risk of forced selling tied to index rebalancing, a factor JPMorgan explicitly attributes to the correction's root cause rather than liquidity deterioration.

Positioning Indicators: Easing Pressure in Futures Markets

Perpetual futures and CME Bitcoin futures data underscore the de-risking phase's conclusion. Open interest in perpetual contracts and CME futures has shown a decline in short-term speculative positioning, with both retail and institutional investors completing their position reductions by late 2025. JPMorgan notes that this trend aligns with a broader normalization of capital flows, as evidenced by reduced leverage and tighter funding rates in perpetual markets.

The bank's analysis also dismisses liquidity as the primary driver of the selloff, emphasizing that the correction was "triggered by investor de-risking" following MSCI's October announcement. This distinction is critical: liquidity concerns often signal deeper systemic risks, whereas de-risking implies a temporary reallocation of capital rather than a structural breakdown.

Strategic Reentry: JPMorgan's 2025-2026 Framework

JPMorgan's reentry into the crypto space is anchored in its Special Advisory Services unit, launched in early 2026 to provide high-touch guidance on digital assets, AI, and cybersecurity. This initiative reflects the bank's recognition of crypto's evolving role in client portfolios, particularly as institutional adoption accelerates. For instance, JPMorgan now allows institutional clients to use Bitcoin and Ether as collateral, a move that signals growing institutional confidence in the asset class.

The bank's 2025 Alternatives Outlook further underscores crypto's potential as a diversifier. While acknowledging Bitcoin's volatility, JPMorgan argues that its volatility-adjusted comparison to gold still supports a theoretical price of $170,000 over 6–12 months. This projection hinges on the stabilization of key metrics, including MicroStrategy's (MSTR) enterprise-value-to-BTC-holdings ratio, which remains above 1 and has not necessitated forced sales.

Investment Case: Cost Dynamics and Long-Term Resilience

A critical factor in JPMorgan's investment thesis is Bitcoin's production cost, currently estimated at $90,000. If prices remain below this threshold for an extended period, miners could face renewed sell pressure. However, the bank's analysis suggests that the current stabilization in flows and positioning data indicates a near-term floor, particularly as institutional demand for crypto-tracking ETFs broadens access to the asset class.

JPMorgan also emphasizes the maturation of private markets and alternative assets as complementary opportunities. For example, private credit and infrastructure are positioned to benefit from U.S. tax reform and deregulation, offering diversification in a high-correlation environment. This broader context reinforces crypto's role as a strategic allocation rather than a speculative bet.

Conclusion: A Cautious but Constructive Outlook

While the crypto market's volatility remains a wildcard, JPMorgan's data-driven analysis paints a cautiously optimistic picture. The stabilization of ETF flows, easing of futures positioning, and MSCI's index decisions collectively suggest that the selloff may be nearing a bottom. For investors, the key takeaway is to prioritize tactical reentry strategies that align with JPMorgan's framework-leveraging institutional-grade tools, monitoring production costs, and hedging against macroeconomic shifts.

As the financial landscape evolves, crypto's integration into mainstream portfolios is no longer a question of if but how. JPMorgan's insights provide a roadmap for navigating this transition with discipline and foresight.