Historic deleveraging of crypto market could be coming to an end: JPMorgan.
The crypto market price crashes could be nearing an end.
Nikolaos Panigirtzoglou, a strategist at JPMorgan, believes the historic deleveraging of the crypto market may be coming to an end. He says this could signal the close of the worst of the bear market. Panigirtzoglou attributed his opinion to the increased willingness of firms to bail out companies and a healthy pace of venture capital funding in May and June.
The strategist said key indicators, like the Net Leverage metric, support the assessment. Panigirtzoglou explained that the major crypto firms are reducing debts – either selling off assets in a rush or willingly. This process began in May when the Terra ecosystem collapsed and wiped out tens of billions of dollars. Major firms like Celsius, BlockFi, and Three Arrows Capital (3AC) have run into turbulent waters. Panigirtzoglou said the severity of deleveraging of some crypto firms could be so severe that they suggest that the tremors from 2022’s crypto market fall continue to reverberate.
He sees deleveraging coming to an end with a number of crypto entities stepping in to bail out drowning companies. The expert pointed out that crypto entities with stronger balance sheets are currently stepping in to help contain the contagion. Sam Bankman-Fried’s FTX seems to be on the advantage side. FTX is trying to expand its influence across the industry in the current turbulent times. The platform is said to be acquiring the BlockFi crypto lending platform for $25 million. But BlockFi CEO Zac Prince has brushed this off as rumors.
Moreover, there was about $5 billion in VC funding to crypto firms in May and June, as per JPMorgan’s estimates. Panigirtzoglou regards the healthy pace of venture capital funding in the crypto space as a good sign.