JPMorgan Doubts U.S. Crypto Reserve Approval Amid Market Turmoil
1min read JPMorgan has expressed significant skepticism regarding the approval of a U.S. strategic cryptocurrency reserve, highlighting the challenges and potential risks associated with such a proposal. The financial institution's analysis suggests that the likelihood of congressional approval for such a reserve is below 50%.
One of the key concerns raised by jpmorgan is the inclusion of smaller cryptocurrencies in any proposed reserve. Tokens such as XRP, Solana (SOL), and Cardano (ADA) are likely to be excluded due to their volatility and the associated risks. According to Nikolaos Panigirtzoglou, managing director at JPMorgan, "If a U.S. strategic crypto reserve is eventually approved, it would be difficult to include smaller tokens outside Bitcoin and Ethereum."
The debate surrounding the establishment of a U.S. strategic crypto reserve has been ongoing, with various stakeholders weighing in on the potential impacts. The proposal has faced significant skepticism, particularly from investors who are concerned about the feasibility and legislative hurdles involved. Previous state-level proposals in locations such as Montana, North Dakota, South Dakota, and Wyoming have failed, further emphasizing the reluctance among lawmakers to endorse cryptocurrency reserves.
Globally, central banks have also exhibited caution regarding the use of cryptocurrencies as reserve assets. The Swiss national bank and Poland’s central bank have rejected bitcoin from their list of reserve assets, while Singapore has characterized cryptocurrencies as misaligned with its long-term investment strategies. The European Central Bank has also taken a dismissive stance on bitcoin reserves, reflecting a prevailing uncertainty among policymakers worldwide.
The uncertainty surrounding the U.S. strategic crypto reserve coincides with notable market developments. February witnessed Bitcoin experiencing a nearly 20% decline, coupled with significant outflows from spot bitcoin ETFs. JPMorgan analysts attribute part of this downturn to actions taken by retail investors, while futures data indicates that institutional investors are similarly retracting from the market.
Adding to market apprehensions, cryptocurrency-related entities are struggling with fundraising initiatives. The more favorable terms offered signal diminishing enthusiasm from investors, which compounds existing worries about market saturation. With Strategy’s stock depreciating by 40% from its November peak and crypto miners seeking substantial financing, there are emerging signs of declining appetite within capital markets.
As indicated by JPMorgan’s analysis, the path towards a U 