JPMorgan Flags Bottoming Signals as January Data Suggests Crypto Market Stabilization Phase

The cryptocurrency market is displaying early signs of stabilizing after a sharp de-risking cycle that extended through late 2025. Analysts at JPMorgan, led by Nikolaos Panigirtzoglou, point to multiple indicators suggesting the market may be in a bottoming phase rather than facing further substantial declines. Their analysis examines flow data, positioning metrics, and market structure to argue that the worst of the recent selling has likely passed.

January Brings Potential Turning Point: Flow Data Suggests Bottoming

Bitcoin and Ether ETF flows tell a revealing story about shifting market sentiment. While December witnessed notable outflows from crypto exchange-traded funds—even as traditional equity ETFs attracted a record $235 billion in inflows—January data paint a different picture. The recent data show flow trends stabilizing, with selling pressure notably easing compared to year-end conditions.

This stabilization extends beyond spot ETFs. Perpetual futures markets display similar signals of bottoming, and positioning proxies derived from Chicago Mercantile Exchange futures indicate that both retail and institutional investors have largely completed the substantial position reductions that characterized Q4 2025. The breadth of these signals across multiple market segments suggests that the investor de-risking cycle may be substantially concluded.

Current price levels reflect this transition. Bitcoin currently trades around $84.65K while Ethereum sits near $2.81K, both down notably from earlier in the cycle as investors responded to shifting risk sentiment. However, JPMorgan’s analysis indicates this pullback represents a positioning correction rather than a fundamental market breakdown.

Beyond De-risking: Liquidity Remains Robust as MSCI Decision Provides Support

A critical argument in JPMorgan’s analysis concerns market liquidity. Rather than deteriorating trading conditions triggering the recent correction, the bank’s market breadth metrics—which measure price impact of trading volumes in CME bitcoin futures and major bitcoin ETFs—show little evidence of liquidity stress. This distinction matters: a positioning-driven pullback differs fundamentally from a liquidity-driven crisis.

The firm credits MSCI’s October announcement regarding potential index exclusions as the primary de-risking catalyst. However, MSCI’s subsequent January decision to exclude bitcoin and crypto treasury companies from its global equity benchmarks—pending a broader methodology review in February 2026—provides near-term relief. This decision reduces forced-selling risks linked to index rebalancing, potentially reinforcing the emerging stabilization phase.

The liquidity picture also extends to major institutional participants. JPMorgan’s analysis indicates that the market structure remains intact despite heavy volume, supporting the thesis that positioning reduction rather than market dysfunction drove recent price action.

Market Developments Beyond Traditional Metrics

Beyond aggregate flow and positioning data, specific market segments demonstrate the complexity of current conditions. Pudgy Penguins has emerged as a notable NFT success story during this cycle, establishing itself as a multi-vertical consumer IP platform rather than pure-play digital asset speculation. The brand has achieved significant traction—generating over $13 million in retail sales, surpassing 1 million units sold, and launching games exceeding 500,000 downloads in initial weeks. With the PENGU token distributed to more than 6 million wallets, the platform demonstrates that portions of the crypto ecosystem continue building utility and user adoption despite near-term market pressures.

Asset managers including Bitwise continue outlining frameworks for 2026 market recovery, identifying specific tests that could validate broader rallies. These narratives suggest market participants are positioning beyond the immediate bottoming phase, though successful execution remains dependent on further stabilization evidence.

Looking Forward: Position Unwinding Cycle May Be Complete

JPMorgan’s overarching conclusion centers on the view that the bulk of the crypto position unwinding appears largely behind the market. January’s flow and positioning data point toward a potential bottoming phase rather than the commencement of a new downleg. While January trading has included sharp movements—Bitcoin briefly declining to $85,200 amid broader market volatility affecting equities and precious metals—the underlying trend in positioning metrics suggests the heavy lifting of de-risking has concluded.

The convergence of evidence across multiple metrics—from ETF flows to perpetual futures positioning to CME derivatives data—supports this bottoming narrative. If this assessment proves accurate, subsequent market direction may increasingly depend on positive catalysts rather than further forced liquidations. The stabilization phase JPMorgan identifies could represent a critical inflection point for market participants reassessing exposure into the latter half of the first quarter.