As the crypto market continues to see more red days, fear, uncertainty, and doubt appear to be the new order. However, JPMorgan, a global leader in financial services believes that the current downturn in the crypto market will soon end.
JPMorgan Stays Positive
Financial strategists in JPMorgan Chase & Co., “the current phase of deleveraging in cryptocurrencies is at an advanced state and may not last much longer.”
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According to a Bloomberg report, JPMorgan noted that a good load of troubles may be behind crypto now. Indicators like the firm’s net leverage metric “suggest that deleveraging is already well advanced,” he added.
More so, it was noted that the failures of many cryptocurrency companies should not be a surprising thing considering the huge price declines seen among tokens.
Nikolaos Panigirtzoglou, a strategist at JPMorgan Chase & Co., added that entities that used higher leverage in the past are now the most vulnerable as crypto prices are heading south. The liquidity crunch at crypto hedge fund Three Arrows Capital “is a manifestation of this deleveraging process,” the report said.
Part of the report noted:
“The current deleveraging cycle may not be very protracted, given the fact that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion. Notably, venture-capital funding, an important source of capital for the crypto ecosystem continued at a healthy pace in May and June.”
Crypto Industry Sees Turbulence
Of recent, there has been a substantial number of cases where investors and crypto companies have been hit with big losses and liquidations.
Additionally, the total market cap of cryptocurrency has recorded a huge decline. As revealed by Coingecko, the total market cap fell to about $930 billion in June ending after rising above $3 trillion in November 2021.
Among the big players suffering a big blow from the turbulent market conditions are Terra, Three Arrows Capital (3AC), and Celsius Network. Precisely, the Terra ecosystem collapsed in May after both of its native tokens (UST and LUNA) fell by over 90%.
Similarly, Celsius Network has been forced to halt withdrawals, swaps, and transfers due to liquidity imbalance. On the other hand, the crypto hedge fund, Three Arrows Capital, has been given a liquidation order by a court as it is currently insolvent.
In another development, crypto exchange FTX granted BlockFi a line of credit and reportedly, FTX wants to acquire the crypto firm. With all of these turmoils in sight, JPMorgan has chosen to stay optimistic claiming that the crypto market downturn will not last any longer.
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