JPMorgan's Major Report: The "De-risking" Phase of Cryptocurrency May Have Bottomed Out, ETF Capital Flows Send a Key Signal

Global top investment bank JPMorgan recently released an analysis report indicating that the ongoing “de-risking” process in the cryptocurrency market that has lasted for several months may have already come to an end. The core basis of the report is that the outflows of funds from Bitcoin and Ethereum spot ETFs showed significant signs of stabilization in January 2026, while the position pressures in the perpetual futures market also eased simultaneously.

Analysts emphasize that the decline at the end of last year was mainly driven by proactive position reductions by investors triggered by the MSCI index removal controversy, rather than deteriorating market liquidity. As MSCI decided not to remove related companies in its February index review, systemic selling pressure was alleviated. The market is shifting from a “one-way outflow” to a healthy “two-way flow” pattern, providing key support for the market to build a phased bottom.

Authoritative Judgment: Why does JPMorgan believe the “worst moment” may be over?

JPMorgan is known for its rigorous macro and market structure analysis, and its views on cryptocurrencies have always attracted attention. This time, led by Managing Director Nikolaos Panigirtzoglou and his team, the latest report presents a core judgment that has energized the market: the cryptocurrency “de-risking” process starting in Q4 2025, its most intense phase, may have already passed. This conclusion is not baseless speculation but is based on cross-validation of multiple data indicators.

The report first reviews the abnormal market performance at the end of last year: despite global stock ETFs recording a record net inflow of $235 billion in December 2025, Bitcoin and Ethereum spot ETFs experienced simultaneous fund outflows. This “divergence” clearly indicates that funds were not withdrawing entirely from risk assets but were selectively and actively reducing their positions in cryptocurrencies. JPMorgan’s analytical framework carefully distinguishes two causes of decline: one is “market failure-type sell-off” caused by liquidity exhaustion, and the other is “position rebalancing sell-off” triggered by specific events where investors actively adjust their holdings. After analyzing deep liquidity indicators such as trading volume and price impacts of Bitcoin futures and spot ETFs on the Chicago Mercantile Exchange (CME), they explicitly ruled out the former. The report states: “There is little evidence that liquidity deterioration drove this sell-off.”

The true “catalyst” is believed to be MSCI’s announcement on October 10, 2025. At that time, MSCI announced it would consider removing companies like MicroStrategy, which hold large amounts of Bitcoin as treasury assets, from its global stock indices. This news instantly triggered a “precautionary reduction” by passive funds and institutions tracking the index, fearing forced sales at lower prices in the future. This potential sell-off caused by index rule changes has a clear starting point and transmission chain, making it a typical “event-driven de-risking.” The good news is that MSCI recently announced that it would temporarily suspend the removal in its upcoming February 2026 assessment and conduct broader policy reviews in the future. This major uncertainty has been temporarily resolved, providing the market with a valuable breathing space.

ETF fund flow “two-way”: the core observation anchor for market stabilization

If JPMorgan’s conclusion is a macro judgment, then the fund flow data of spot ETFs is the most direct micro evidence supporting this view. Data shows that a key shift occurred in early January 2026: from the previous persistent unilateral net outflow at the end of last year to the current two-way flow with both inflows and outflows.

This shift has significant implications for market structure. For example: on January 5, the US Bitcoin spot ETF achieved a strong net inflow of $697 million; however, by January 7, it turned into a net outflow of $243 million. This intra-day and daily fluctuation in fund flows signals a fundamental change in market driving forces. JPMorgan’s report points out that this is no longer the “forced reduction” seen in Q4 2025, but more of a “tactical rotation.” In short, investors are no longer uniformly panicking and fleeing but are beginning to adjust their positions flexibly based on short-term judgments of prices, volatility, and macro environment.

This “two-way flow” healthy pattern will have a series of positive effects on the market. First, it helps narrow Bitcoin’s intraday trading range, as real-time battles between bulls and bears replace unilateral selling pressure. Second, it provides more solid “buy support” when prices fall, as “smart money” willing to absorb the dips begins to appear. Finally, it greatly improves the funding rate structure in the perpetual futures market, reducing the risk of extreme positive or negative rates caused by one-sided bets, and restoring derivatives markets to a more neutral state. Therefore, the shift of ETF fund flows from “outflow” to “volatility” is not an immediate signal of a big rally but is undoubtedly one of the clearest signs of the market transitioning from a “downtrend” to a “bottoming phase.”

Market stabilization three key signals analysis

• Signal 1: ETF fund flows
  • Phase feature: from December 2025’s persistent net outflow to January 2026’s two-way volatility.
  • Key data: January 5 net inflow of $697 million; January 7 net outflow of $243 million.
  • Market implication: the sell-off shifted from “forced” to “tactical,” indicating selling pressure easing and bulls and bears rebalancing.
• Signal 2: Futures market positions
  • Observation indicators: changes in perpetual futures open interest and funding rates.
  • Market implication: reduced pressure from leveraged longs being liquidated, and overly pessimistic sentiment being repaired. Divergence between position indicators and prices suggests weakening downward momentum.
• Signal 3: Policy risk mitigation
  • Key event: MSCI’s decision to temporarily suspend removing digital asset treasury companies (e.g., MicroStrategy) from indices.
  • Direct impact: removed a major potential “forced sell” risk for passive index funds.
  • Market sentiment: provides a “temporary relief” for the stock prices of related companies and overall crypto beta sentiment.

MSCI policy “reprieve”: the Damocles sword removing systemic sell-off

JPMorgan emphasizes the market significance of MSCI’s latest decision, viewing it as an important external force to consolidate market stability. As a leader in global index compilation, MSCI’s decisions directly influence asset allocation of trillions of dollars in passive tracking funds. The statement last October about possibly removing “digital asset treasury companies” is akin to hanging a “Damocles sword” over the traditional capital markets and the crypto market.

Such companies (with MicroStrategy being the most typical) have business models that make their stock prices highly correlated with Bitcoin prices, serving as “proxy stocks” for traditional stock investors to gain crypto exposure. Once excluded from mainstream indices, ETFs and funds tracking these indices will be forced to sell unconditionally according to regulations, forming a purely mechanical selling force unrelated to company fundamentals or Bitcoin value. This “structural selling pressure” was the core logic behind many institutional investors choosing to exit early in Q4 2025.

Therefore, MSCI’s decision to “pause” in the February assessment has a psychological calming effect far greater than its actual impact. It at least temporarily removes a large-scale potential sell-off source for a future assessment cycle. The report points out that this makes stocks like MicroStrategy, which might face a “passive sell spiral,” temporarily revert to assets that can reflect market perception normally. This not only stabilizes the “crypto proxy stocks” themselves but also, through emotional transmission, alleviates a major concern in the entire crypto market, allowing price drivers to return to fundamentals such as supply and demand, macro policies, and industry innovation.

From a structural perspective: the order and connotation of stabilization across different market segments

JPMorgan’s report also implicitly reveals a profound market structure insight: the current adjustment and stabilization show a clear “sequence” and “different causes” across various sub-markets and investor types.

Reviewing Q4 2025, the market experienced “two waves” of de-risking. The first wave occurred in October, mainly in the perpetual futures market. At that time, highly leveraged long positions were rapidly liquidated following MSCI news, evidenced by sharp declines in futures open interest and volatile funding rates, mainly reflecting internal deleveraging by “crypto-native investors.” The second wave happened in November and afterward, primarily in the spot ETF market. During this phase, funds continued to flow out, mainly from “non-crypto-native investors” (especially retail investors) entering via ETFs, whose behavior was driven more by concerns over index rule changes and policy uncertainty, leading to risk reduction.

Understanding this sequence helps clarify the significance of current stabilization signals. The ETF fund flow stabilization in January first indicates that the panic among later-entering, more policy-sensitive “peripheral funds” has been largely released. Second, the simultaneous easing of position pressures in the perpetual futures market suggests that “internal leverage” has also been sufficiently cleaned up. This structure, with stabilization radiating from the “core” to the “periphery,” is more robust than a rebound in a single market. It depicts a picture: initial declines caused by high leverage liquidations, followed by a negative feedback loop of new capital panic redemptions, which is now breaking, and the market is seeking a new, healthier balance.

Investor operation ideas: the offensive and defensive strategies during the “bottoming” phase

For investors, JPMorgan’s report is less about providing a simple “buy” signal and more about indicating a market phase transition. The current market may be shifting from a “trend decline” into a complex “bottom-building” stage. During this phase, operational strategies need adjustment.

Cautious investors’ main task is to “confirm trend reversal.” Focus on the following right-side confirmation signals: 1. whether weekly ETF net inflows can turn positive and persist; 2. whether Bitcoin prices can effectively break through and stabilize above key resistance levels formed since Q4 2025 (such as certain moving averages or previous consolidation platforms); 3. whether the market shows sustained new narratives or fundamental positive developments (e.g., new institutional adoption cases, major regulatory progress). Before confirming a trend reversal, viewing the current situation as “downward momentum weakening” rather than “uptrend starting” is more prudent.

Aggressive investors may consider implementing “strategic phased accumulation” amid volatility. The market’s two-way fluctuations create buying opportunities during dips. Funds can be divided into multiple parts, buying gradually at key support levels or when market sentiment is extremely pessimistic, to average costs. At the same time, asset allocation should be balanced, avoiding over-concentration. During this phase, Bitcoin and Ethereum may demonstrate stronger stability due to higher liquidity and their role as market benchmarks; meanwhile, some fundamentally solid, oversold quality altcoins in this correction may offer higher resilience and returns, albeit with higher risks.

In any case, JPMorgan’s report reminds us that after a period of intense de-risking driven by specific events, the primary task for the market is “repair” rather than “rushing.” Patience and discipline will be the most important qualities to navigate this stage. As ETF channels normalize and uncertainties in traditional finance temporarily subside, the crypto market is gaining a rare, solid foundation time window.