According to the report, analysts Alkesh Shah and Andrew Moss have opined that the digital asset sector is currently constrained to a trading range due to low conviction, limited catalysts, and outperformance year-to-date. Furthermore, the challenging macro backdrop is expected to limit the upside potential of digital assets.
As per the bank’s discussions with its clients, there has been a resurgence of hedge funds participating in token trading. These funds are capitalizing on momentum strategies, which are fueled by heightened volatility arising from the declining trading volumes.
Momentum investing is a strategy that entails purchasing assets when they are on an upward trend and selling them once they reach their peak. This investment approach hinges on volatility to identify short-term uptrends and exploit buying opportunities before the momentum dissipates.
According to Bank of America’s forecast, cryptocurrency trading volumes are expected to remain subdued, with retail investors refraining from active participation. The report also highlighted the endeavors by conventional finance (TradFi) enterprises and technology companies to create blockchain applications that concentrate on tokenizing demand deposits, repo settlements, and bond issuance.
Although the report portrayed a prudent perspective regarding the cryptocurrency markets, it also recognized the sustained fascination and progress in blockchain technology by established financial institutions and technology companies.
