JPMorgan: Q1 crypto inflows slashed to one-third of last year…both retail and institutions pull back

An analysis has found that the amount of money flowing into the virtual asset (cryptocurrency) market in the first quarter of this year plunged to about one-third of the level seen in the same period last year.

According to The Block on the 3rd (local time), JPMorgan said in a report that “total virtual-asset inflows in Q1 this year came to around $11 billion,” adding that “this is markedly lower than last year’s inflows ($130 billion), which were an all-time high.” If the current trend continues, full-year inflows are expected to come in at around $44 billion.

The report said most of the quarter’s inflows came from corporate balance-sheet-driven bitcoin buying and VC funding. Strategy, in particular, continued to accumulate bitcoin using proceeds raised through share issuance. By contrast, other companies are taking a defensive stance, selling bitcoin holdings to fund share buybacks and other uses.

The cooling in risk appetite is also evident in the data. JPMorgan noted that “Chicago Mercantile Exchange (CME) bitcoin futures positioning has weakened. Outflows were also observed in spot bitcoin and ether ETFs,” explaining that “so far this year, flows from retail and institutional investors have been very limited, or have even posted negative growth.”

Crypto miners are also selling bitcoin or using it as collateral to secure liquidity and meet capital expenditure needs. The tendency has become more pronounced as some miners shift their business focus toward artificial intelligence (AI), disposing of assets they hold.

VC funding, in total-dollar terms, held up relatively well. However, the number of deals and investor participation fell instead. The assessment is that polarization is emerging, with capital concentrating in a small number of proven firms.

JPMorgan said that “digital-asset flows slowed sharply in Q1,” adding that “the market is in a fragile structure that relies on buying by specific companies and concentrated VC capital.”