JPMorgan Identifies Potential Crypto Market Recovery as ETF Flows Shift Direction

JPMorgan analysts have observed a stabilization in the flow of funds across spot cryptocurrency ETFs at the beginning of January, following a significant period of de-risking that primarily involved ETF redemptions. Bitcoin's price is currently at $90,428 (down 2.50%), while Ethereum is trading at $3,100 (down 4.54%).

Key Takeaways

JPMorgan indicates a shift in ETF flows from one-way selling to a two-way dynamic, suggesting a potential market stabilization.
On January 5, U.S. spot Bitcoin ETFs experienced $697.25 million in net inflows, but on January 7, there was a change to $243 million in net outflows.
The analysis implies that the market correction is related to positioning rather than fundamental weaknesses.
MSCI's decision not to remove digital-asset treasury companies (DATCO) from indices adds further confidence to traditional investors, reducing forced-selling risks.

Spot ETF Flows Stabilize After Late-2025 De-Risking

According to the bank’s insights, current market activity indicates that flows are now two-way, contrasting the previous pattern of one-sided selling. On January 5, U.S. spot Bitcoin ETFs saw net inflows of $697.25 million, but this reversed to $243 million in net outflows by January 7. This trend is significant, as it shifts the focus from “forced reductions” to “tactical rotations,” historically enhancing intraday price stability and increasing support for Bitcoin perpetual funding regimes.

JPMorgan’s perspective aligns with previous comments from Nikolaos Panigirtzoglou’s team. They made a distinction between October's perpetual deleveraging and November's ETF-driven selling, primarily by retail investors. This differentiation reinforces the argument that the recent market correction reflects positioning changes rather than a flawed market structure.

Additionally, traditional investors received a favorable signal when MSCI announced it would not eliminate digital-asset treasury companies (DATCO) from its indexes for the time being, as it conducts a broader assessment. Following this announcement, shares of Strategy (MSTR) rose, mitigating immediate forced-selling risks for passive index products that include crypto-related equities.

Why Two-Way Flows Are Changing the Trade Setup

The current landscape revolves around a change in flow regimes rather than relying solely on JPMorgan's predictions. Late 2025 was characterized by a scenario where ETF redemptions and perpetual deleveraging were interconnected. However, early January has revealed alternating “creation days” and “redemption days.” This offers desks better opportunities for hedging through bases and options.

If MSCI keeps the DATCO segment in its benchmarks throughout its February review, equity reallocations will not inadvertently act as a hidden selling mechanism for crypto assets. This development supports tighter connections among Bitcoin spot prices, CME basis, and the momentum of listed ETF flows as we approach the month-end rebalancing.