JPMorgan: The main reason for the pullback in the crypto market is retail investors dumping Bitcoin and Ethereum ETFs, while $96 billion was injected into stock ETFs during the same period.

According to the latest research report from JPMorgan Chase, the main driver of the cryptocurrency market adjustment in November 2025 is the large-scale withdrawal of retail investors from Spot Bitcoin and Ether ETFs, with outflows reaching $4 billion that month, surpassing the historical record set in February. In stark contrast, retail investors invested approximately $96 billion in stock ETFs during the same period, indicating that this cryptocurrency dumping is not a broad-based risk-averse behavior.

The analyst team pointed out that the price of Bitcoin has fallen below the estimated production cost support level of 94,000 USD, but the long-term correlation between Crypto Assets and the stock market remains solid, especially the close linkage with the Russell 2000 technology sector.

Divergence in Capital Flows: Dual Strategies of Retail Investors

J.P. Morgan's research report released in November revealed a thought-provoking market phenomenon: retail investors are adopting drastically different strategies towards Crypto Assets and traditional stock markets. According to the analysis team led by Managing Director Nikolaos Panigirtzoglou, approximately $4 billion has flowed out of Spot Bitcoin and Ethereum ETFs so far this month, a figure that surpasses even the historical outflow record set in February. This massive withdrawal contrasts sharply with the operations of native Crypto traders, who have stabilized in November after significantly deleveraging through perpetual futures in October.

At the same time, the stock market is enjoying a continuous influx of retail funds. Data shows that in November, retail investors have poured about $96 billion into stock ETFs, including leveraged products. If this trend continues until the end of the month, the monthly inflow will reach about $160 billion, comparable to the levels seen in September and October. This significant divergence indicates that retail investors still view Crypto Assets and stocks as different asset classes, even though both are classified as risk assets.

From the perspective of behavioral finance, this differentiation strategy is not the first occurrence. JPMorgan pointed out that retail investors have only shown a pattern of simultaneously selling Crypto Assets ETF for three months this year - February, March, and the current November. This selective withdrawal indicates that retail investors have a differentiated assessment framework for different types of risk assets, rather than simply adopting a comprehensive risk-averse attitude. Analysts emphasized in the report: “Interpreting the dumping of Crypto Assets ETF as a signal for retail investors turning bearish on a broader range of risk assets, including stocks, would be a mistake.”

Key Market Data Comparison

• Crypto Assets ETF Outflow: $4 billion (Year to date November)
• Stock ETF Inflows: 96 billion USD (year-to-date November)
• Bitcoin Key Support Level: 94000 USD (estimated production cost by JPMorgan)
• Correlation Indicator: Closely linked to the Russell 2000 technology sector.
• Historical Comparison: The outflow this time has exceeded the record set in February.

The change in market structure reflects the evolution of the Crypto Assets investor base. With the launch and popularization of Spot ETFs, more retail investors from traditional sectors are able to participate in the Crypto Assets market through familiar financial products. However, the behavior patterns of these investors exhibit systemic differences compared to native participants in the Crypto Assets space. This difference becomes particularly evident during market volatility and provides a new dimension for market dynamics analysis.

Evolution of Market Structure: New Price Discovery Mechanism Driven by ETF

The introduction of crypto assets spot ETFs fundamentally changes the price discovery mechanism of the market. JPMorgan analysts point out that the current market adjustment is mainly driven by “non-crypto asset investors, primarily retail investors who typically invest in the crypto asset market using spot Bitcoin and Ether ETFs.” This observation reveals how traditional financial instruments bring new price influencers to the crypto asset market, while also creating tighter linkage channels with traditional markets.

From the time series analysis of capital flow, the ETF outflows in November showed an accelerating trend. Unlike the sell-off in October, which was mainly driven by native investors in crypto assets leveraging through perpetual futures, the selling pressure in this round came more from retail ETF holders who are more sensitive to price. This shift reflects the differing reactions of various investor groups to market signals: professional traders pay more attention to leverage and the structure of the derivatives market, while retail ETF investors respond more directly to price fluctuations.

The failure of Bitcoin's production cost as a key support level is also worth noting. The $94,000 production cost line estimated by JPMorgan has always been regarded by the market as an important psychological and technical support, but the recent drop below it indicates that in certain market conditions, liquidity factors may overwhelm fundamental value anchoring. This dynamic is similar to situations in traditional commodity markets where prices briefly drop below production costs, typically getting corrected after supply and demand are rebalanced.

From a more macro perspective, the correlation patterns between Crypto Assets and the stock market provide important insights. Analysts confirm that the Crypto Assets market continues to trade most closely with small-cap tech stocks—particularly the Russell 2000 tech sector. This correlation reflects the connection between Crypto Assets and the early innovation and venture capital-driven investor base, and also explains why, while tech stocks continue to be favored, Crypto Assets are experiencing capital outflows.

Speculative Sentiment Cools: Options Market and Momentum Trading Slow Down

J.P. Morgan's report also captured evidence of subtle changes in market speculative sentiment. Data shows that the most speculative retail segment—traders active in call options or single-stock momentum trading—has retreated in recent weeks. Data from options clearinghouses indicates a decline in weekly call option purchases by small retail accounts, while a basket of stocks favored by U.S. retail traders is also showing similar signs of slowdown.

The cooling of this speculative sentiment needs to be understood in a longer-term trend. Analysts point out that “nevertheless, this recent downgrade has merely reversed the speculative impulse of last month and has not changed the upward trend since 2023.” This observation suggests that the current market adjustment may be more akin to a healthy pullback within an upward trend rather than a fundamental trend reversal. Historically, such cyclical fluctuations in speculative sentiment are quite common during bull market processes.

From the specific data of the options market, the decline in call option purchases is mainly concentrated in the areas of Crypto Assets and high-growth technology stocks, while the options activity in defensive sectors and dividend stocks remains relatively stable. This selective cooling further supports JPMorgan's main argument that the current market adjustment is asset-specific rather than a broad-based risk aversion. For market participants, this disparity provides important tactical opportunities.

The slowdown of momentum trading strategies is also consistent with the overall decrease in market volatility. When clear momentum opportunities diminish, short-term traders tend to reduce risk exposure and wait for new catalysts to emerge. This behavioral pattern creates a “rest period” in the market, often accumulating energy for subsequent directional breakthroughs. From a technical analysis perspective, this contraction in volatility often foreshadows significant price movements on the horizon.

Historical Pattern Comparison: The Specificity and Universality of This Adjustment

Analyzing the current market correction in historical context reveals both familiar patterns and unique characteristics. Similar to the correction at the beginning of 2024, this current dumping is also driven by outflows of ETF funds, but the macro environment and market structure behind it have undergone significant changes. At that time, the Federal Reserve's policy stance was more dovish, while currently there is greater uncertainty regarding interest rates, and this difference affects the depth and duration of the correction.

From the perspective of investor composition, the institutional participation in the crypto assets market has significantly increased since the beginning of the year. On one hand, this enhances the market's liquidity depth, while on the other hand, it may also change the characteristics of price volatility. Institutional investors usually have stricter risk management frameworks and longer investment horizons, and their participation should theoretically reduce the overall volatility of the market. However, when multiple investor groups adjust their positions simultaneously, it may also create a liquidity resonance effect.

Seasonal factors are also worth considering. Historical data shows that November is often a transitional period for the crypto assets market, situated between the strength of the third quarter and the volatility of year-end. This seasonal pattern is related to structural factors such as tax planning and rebalancing of risk assets, which may partly explain why retail investors choose to adjust their crypto assets positions at this time.

From the perspective of cross-market correlation, the current persistent close correlation between Crypto Assets and technology stocks contrasts with the decoupling period of 2022-2023. At that time, Crypto Assets exhibited greater independence, while now they are more clearly integrated into the traditional risk asset framework. This change reflects both the progress in market regulation and the increase in institutionalization, as well as indicating that the prices of Crypto Assets are influenced by a wider range of macroeconomic factors.

Future Outlook: Finding and Rebuilding Market Equilibrium

Based on the current market dynamics, Morgan Stanley's analysis provides important clues for possible future paths. First, if the outflows from crypto assets ETFs continue to exceed historical averages, further price adjustments may be needed to attract buying interest. Considering that Bitcoin has dropped below estimated production costs, such adjustments may occur more through time rather than price, meaning it may fluctuate within a range until supply and demand are rebalanced.

Secondly, if the strong capital inflows in the stock market continue, they may eventually spill over into the encryption currency sector. Historical patterns show that the contagion of risk appetite usually has a lag, as investors tend to seek higher beta opportunities after achieving sufficient returns in traditional risk assets. Cryptocurrencies, especially Bitcoin and Ethereum, are likely to benefit from this capital flow.

From the perspective of regulation and development, the institutionalization process of the crypto assets market is still ongoing. Increased participation from traditional financial institutions, clearer regulatory frameworks, and improved infrastructure are all laying the groundwork for the next round of growth. The current market adjustment, in the context of these structural improvements, may be seen as an episode in a long-term upward trend rather than a reversal of the trend.

Technical analysis also provides some optimistic signals. Despite facing pressure in the short term, the long-term uptrend line that started in 2023 remains intact. Several key technical indicators show that the market has entered oversold territory, creating conditions for a rebound. At the same time, the decrease in leverage in the derivatives market has reduced the risk of forced selling, providing space for healthier price discovery.

Investment Insights: Finding Opportunities in a Divergent Market

For participants with different investment styles, the current market environment provides differentiated opportunities. For long-term investors, the historic capital outflows from crypto assets ETFs may create a chance to accumulate positions in batches. This is especially true when Bitcoin prices are near or below estimated production costs, which historically have provided a better risk-reward ratio. The key is to have enough patience and discipline in position management.

For tactical investors, the divergence of capital flows between Crypto Assets and the stock market provides relative value opportunities. When two highly correlated asset classes show short-term performance divergence, it often signals an opportunity for convergence trades. Considering that the long-term correlation emphasized by JPMorgan remains intact, this divergence may be difficult to sustain.

From an asset allocation perspective, the role of crypto assets in the current investment portfolio needs to be reassessed. The low correlation with traditional assets was once one of its main attractions, but with the increasing correlation to tech stocks, this diversification benefit may diminish. Investors may need to adjust their allocation ratios and expectations for crypto assets to reflect this new market reality.

The priority of risk management also needs to be elevated. During periods of market structure change, historical volatility and correlation indicators may fail, necessitating a more dynamic risk assessment framework. This is especially crucial for leveraged investors, as ensuring the ability to maintain positions during extreme market conditions is vital. Diversifying investments across different crypto asset subfields (such as Layer 1, DeFi, infrastructure, etc.) can also help reduce specific risks.

FAQ

Why are retail investors buying stock ETFs while dumping crypto assets ETFs?

JPMorgan's analysis shows that retail investors view Crypto Assets and stocks as different asset classes, currently selectively adjusting their Crypto Assets positions while maintaining exposure to stock risks, reflecting asset-specific judgments rather than a comprehensive hedging approach.

What does Bitcoin falling below the production cost of 94,000 dollars mean?

Short-term price drops below production costs occur from time to time in the commodity market, usually rectified after supply and demand rebalance. However, sustained prices below costs may force inefficient miners out of the market, ultimately reducing supply to support prices.

Has the correlation between Crypto Assets and stocks been broken?

JPMorgan confirmed that the long-term correlation remains strong, particularly with a close connection to the Russell 2000 technology sector, indicating that Crypto Assets are still viewed as part of the early innovation asset class.

What are the similarities and differences between the current market adjustment and that of February?

The similarities lie in that they are both driven by ETF fund outflows and are of comparable scale, while the difference is that this adjustment is accompanied by strong capital inflows into the stock market, and the leverage level of native crypto asset traders has already declined in advance.

How does the cooling of speculative sentiment affect the health of the market?

In the short term, cooling may reduce market volatility and momentum opportunities, but in the medium to long term, it is conducive to healthier price discovery, reducing systemic risks brought about by excessive leverage, and laying the foundation for the next phase of growth.