JPMorgan: Crypto Correction Driven by Native Traders, Not ETFs

Native Investors Lead Deleveraging Charge

JPMorgan analysts, led by Nikolaos Panigirtzoglou, attribute last week’s crypto market correction—marked by a $19 billion liquidation cascade—to aggressive deleveraging among crypto-native investors via perpetual futures, rather than traditional ETF or CME participants. Open interest in Bitcoin and Ethereum perpetual contracts plummeted about 40% in dollar terms, outpacing the assets’ price drops of 14% and 9%, respectively, signaling forced unwinds that amplified the sell-off. This pattern, per the October 16 note, underscores how offshore, high-leverage platforms favored by retail and institutional crypto natives bore the brunt, while regulated channels showed resilience amid U.S.-China tariff escalations.

Modest ETF Outflows Highlight Stability

Spot Bitcoin ETFs recorded just $220 million in outflows from October 10-14 (0.14% of AUM), with Ethereum ETFs at $370 million (1.23% of AUM), indicating limited panic among longer-horizon retail and institutional holders. CME Bitcoin futures exhibited minimal liquidations, while Ethereum futures saw heavier de-risking from algorithmic traders like CTAs and quants, not broad institutional flight. JPMorgan views this as evidence of maturing market structure: Institutions via ETFs and CME are stabilizing forces, reducing volatility’s spillover from speculative perps. X discussions amplify this, with @CryptoQuant_com noting perp dominance in cascades, echoing JPM’s analysis.

Implications for Market Dynamics

The correction, triggered by Trump’s 100% China tariffs, highlights a bifurcation: Crypto natives drive swings, but ETF inflows—net positive YTD at $18 billion for Bitcoin—signal sustained adoption. Analysts forecast reduced tail risks as perps mature with better risk controls, potentially capping future drawdowns at 10-15%. For traders, this underscores diversifying beyond leverage, eyeing ETF stability amid 2025’s rebound potential.

Outlook: Resilience Amid Fragmentation

JPMorgan’s insights suggest a healthier ecosystem, with traditional investors anchoring prices. As Bitcoin eyes $115,000 recovery, focus shifts to Fed cuts and ETF momentum for Q4 upside.