According to JPMorgan analysts, crypto de-risking is softening, with early signs of stability showing up in crypto ETF flows and other metrics. In its report, the bank’s analysts, led by Managing Director Nikolaos Panigirtzoglou, noted, “Signs of a bottoming out in January are also seen in other crypto indicators in perpetual futures and in our position proxies on CME futures.”
In December, several investors pulled funds from Bitcoin and Ethereum, but at the same time, equity ETFs enjoyed their largest-ever monthly inflows of $235 billion globally. That difference, the bank noted, reflected a significant pullback in crypto exposure by investors as the year drew to a close.
However, this January, multiple indicators suggest that the digital assets market is starting to stabilize.
JPMorgan analysts say MSCI’s move may improve market stability
According to current ETF data, JPMorgan believes that both retail and institutional investors may have largely completed the position reductions. It wrote, “Taken together, all these indicators suggest that the previous crypto position reduction by both retail and institutional investors during the last quarter of 2025 is likely behind us.”
The analysts added that MSCI’s decision to include crypto-related firms in its February 2026 benchmarks could largely help reinforce market stability. They contended that although MSCI intends to reassess these companies later, the current move could provide firms like Strategy with some short-term relief and diminish the likelihood of mandatory selling caused by index changes.
Additionally, speaking about what drove crypto’s decline in the fourth quarter of last year, the analysts said that while deteriorating liquidity is always a factor, it was “most likely not” the cause of the recent correction.
They pointed to metrics such as market breadth and the impact of trading volumes on CME bitcoin futures and bitcoin ETFs, concluding that liquidity issues likely didn’t cause the decline. They explained the crypto market correction was primarily driven by de-risking following MSCI’s October 10 announcement on Strategy.
They added, “The good news is that there are signs of stabilisation and bottoming out in crypto flow and positioning indicators in January, suggesting that the previous position reduction by investors is largely behind us.”
Bitwise CIO says crypto players have moved past the October 10 liquidation event
Recently, Bitwise Chief Investment Officer Matt Hougan asserted that three conditions must be met for digital assets to reach new record levels this year, and one may already be at play.
He noted that after the market shock on October 10, investors were concerned that big hedge funds could be forced to sell, resulting in continued downward pressure. However, he said such fears seem to be subsiding, as significant position cuts are likely to have occurred before the end of the year, and early 2026 market performance indicates that the overhang is no longer dragging on investors.
Additionally, Hougan said the CLARITY Act, currently moving through Congress, represents just part of what still needs to happen legislatively, adding that its passage would be a key milestone.
He said a stable stock market backdrop is also crucial for crypto, but added that, though there isn’t a clear correlation, a steep selloff in the S&P 500 could pressure risk assets broadly. Currently, markets indicate a low probability of a recession and favorable odds for equities, but the risk cannot be entirely ruled out.
Overall, digital assets’ future is looking good, with the rise in institutional interest, stablecoins, and tokenization markets growing, and the delayed benefits of a more favorable regulatory shift that began in early 2025 manifesting.
Bitwise expects crypto’s early-year strength to continue as long as policy developments stay on track and broader markets perform well.
Claim your free seat in an exclusive crypto trading community - limited to 1,000 members.
