Analysis: The recent cryptocurrency market downturn has been primarily driven by retail investors selling off Bitcoin and Ethereum, as well as the launch of a physically-backed Ethereum ETF.

On November 21st, a J.P. Morgan analyst declared that the recent pullback in the crypto market - which was particularly intensified after Bitcoin fell below the bank's estimated $94,000 production cost/support level - was primarily driven by retail investors selling off Bitcoin and Ethereum spot ETFs rather than by native crypto traders. “In October, although crypto-native investors triggered a market pullback through significant deleveraging (especially in perpetual contracts), this deleveraging in perpetual contracts appears to have stabilized in November,” J.P. Morgan Managing Director Nikolaos Panigirtzoglou and his team wrote in a report on Wednesday. “Instead, the main force driving the continuous crypto market pullback in November is non-crypto investors, especially those retail investors who entered the crypto market through Bitcoin and Ethereum spot ETFs.” The analyst pointed out that so far this month, retail investors have withdrawn approximately $4 billion from Bitcoin and Ethereum spot ETFs, a scale that has exceeded the historical record net outflows in February. This behavior is in sharp contrast to retail flows in the stock market. In November, retail investors have poured around $96 billion into stock ETFs (including leveraged products) - if this pace continues until the end of the month, the total will reach nearly $160 billion, similar to the levels seen in September and October. They noted that retail investors have previously shown similar “divergent behavior”: aggressively buying stocks on one hand while selling off crypto ETFs in a few specific months (only February, March, and the current November this year). This indicates that retail investors still consider crypto assets and stocks as two separate baskets of assets, even though both are regarded as risk assets.