In a report unveiled on Wednesday, JPMorgan analysts expressed reservations about the sustainability of the recent surge in Bitcoin prices, deeming the sharp gains as 'overdone' relative to the cryptocurrency's underlying fundamentals.

Led by Nikolaos Panigirtzoglou, the analysts attributed Bitcoin's 30% price surge in the past month to two main factors—the potential approval of a spot Bitcoin ETF in the US and legal victories in the crypto industry against the SEC. However, the analysts are skeptical that these catalysts justify the extent of Bitcoin's rally. JPMorgan analysts are wary of the catalysts behind the recent crypto rally, particularly the approval of spot Bitcoin ETFs.

"Rather than witnessing fresh capital entering crypto markets, we observe existing capital in bitcoin products shifting into newly approved spot bitcoin ETFs," they noted.

Panigirtzoglou pointed to spot bitcoin ETFs in Canada and Europe, which have experienced limited inflows since launch, indicating a restricted potential for significant inflows into US spot bitcoin ETFs. The analysts also questioned whether recent legal setbacks would lead the SEC to ease its regulatory stance.

"U.S. crypto industry regulations are still pending, and we do not believe U.S. lawmakers would shift their stance due to the legal cases, especially with the memories of the FTX fraud still fresh," they stated.

Another potential catalyst, Bitcoin's upcoming 'halving' event in 2024, which reduces the supply of new bitcoins, is deemed by JPMorgan to be already priced in.

"This argument seems unconvincing as the bitcoin halving event and its effect are predictable and, in our opinion, well factored into the bitcoin price," explained the report.

In essence, JPMorgan identifies risks that the recent Bitcoin rally may falter due to unstable fundamentals. The analysts exercise caution on crypto markets, foreseeing the possibility of a 'buy rumor, sell fact' decline after any spot Bitcoin ETF approval.

The report is released as Bitcoin hovers around $36,000, showing an increase of over 110% year-to-date following a challenging 2022 that witnessed a 64% plunge. However, Bitcoin still trades approximately 48% below its all-time high of nearly $69,000 reached in November 2021. Despite some investors viewing Bitcoin's halving and the potential approval of a US spot Bitcoin ETF as positive catalysts, JPMorgan sees prevailing risks that could undermine a sustained rally. For now, the banking giant maintains a cautious stance in the crypto market.