JPMorgan has declared that the forced selling phase in crypto markets may be over. Drawing on ETF flows, futures positioning, and market breadth indicators, the bank's latest report argues that the de-risking that dominated Q4 2025 has clearly decelerated, pushing the market into a stabilization phase rather than another leg down.
Year-End Capital Rotation: ETF outflows vs. record equity inflows
The report highlights a sharp divergence in flows during the final quarter of 2025: Bitcoin and Ethereum spot ETFs suffered heavy redemptions in December, while global equity ETFs attracted record inflows. This gap reflects investors' massive year-end rebalancing away from risk-on assets like crypto, which was the primary driver of the correction.
Price pullback and volatility spike shift market to range-bound trading
Bitcoin experienced a double-digit percentage drawdown from its peak, while most major altcoins fell even harder. JPMorgan notes the selloff came with elevated volatility and a broad retreat in risk appetite, pushing crypto from a strong uptrend into a directionless range-bound pattern.
January data brightens: ETF outflows narrow, futures hint at a floor
By January 2026, several metrics began to improve. Outflows from Bitcoin and Ethereum ETFs narrowed, suggesting reduced selling pressure. Analysts also spotted similar bottoming signals in perpetual futures markets and CME futures proxy positions: the dominant position reduction by both retail and institutional players over the past quarter appears largely complete.
A key positive catalyst: MSCI decided in its February 2026 index review not to exclude Bitcoin or crypto treasury companies from its global equity indexes. This move lowers the risk of passive selling triggered by index rebalancing, easing near-term pressure on exposures tied to Strategy (formerly MicroStrategy).
Not a liquidity crisis—de-risking drove the selloff
JPMorgan pushes back against claims that market weakness stemmed from deteriorating liquidity. Its breadth indicators show no significant liquidity erosion in CME Bitcoin futures or major Bitcoin ETFs. Instead, analysts point to MSCI's October 2025 signal about potential index exclusion as the real catalyst for preemptive de-risking. The bank concludes: most of the position adjustments are now likely done, and January data aligns with a bottoming and consolidation phase—not the start of a new downtrend.
With de-risking largely behind, the crypto market may trade sideways in the near term. The next move will depend on the macro backdrop, policy signals, and the pace of capital reallocation.