The historic deleveraging of the cryptocurrency market could be coming to an end, which could signal the end of the worst of the bear market, according to a JPMorgan analyst.
In a note on Wednesday, JPMorgan strategist, Nikolaos Panigirtzoglou highlighted the increased willingness of companies to bail out companies and a healthy pace of venture capital funding in May and June as the basis for his optimism.. He said that key indicators support the assessment:
“Indicators like our net leverage metric suggest that deleveraging is already well underway.”
The deleveraging of major crypto firms, whose assets have been sold of their own volition, in haste or through liquidation, largely began in May.when Terra’s ecosystem collapsed and wiped out tens of billions of dollars. Since then, cryptocurrency lenders BlockFi and Celsius and investment firm Three Arrows Capital have had their own problems..
Panigirtzoglou added that the severity of deleveraging by some crypto firms could be so severe that it “suggests the tremors from this year’s crypto market crash are still reverberating”.
However, Panigirtzoglou argues that deleveraging may be coming to an end as cryptocurrency entities are stepping in to bail out struggling companies, stating:
“The fact that crypto entities with stronger balance sheets are currently stepping in to help contain contagion.”
In the midst of the calamities that several blockchain companies, such as Three Arrows Capital and Celsius, are suffering, Sam Bankman-Fried’s FTX exchange is positioning itself to expand its influence in the sector. FTX is rumored to be offering to buy cryptocurrency lending platform BlockFi for $25 million, according to a June 30 report from Cointelegraph. Nevertheless, BlockFi CEO Zac Prince has denied the rumors in a Thursday tweet.
Panigirtzoglou also sees the good pace of venture capital funding in the cryptocurrency space as a good sign. According to JPMorgan estimates, there was about $5 billion in venture capital funding for crypto companies in May and June.. Fundraising metrics tracker Dove Metrics, using data from Airtable, estimates cryptocurrency funding to be higher, at $8.6 billion in the same period.
This funding rate was $2.2 billion lower than March and April, but $3.4 billion higher than May and June 2021.
JPMorgan’s latest predictions should blow fresh air into the hearts of crypto investors in 2022 who have endured what Glassnode has deemed the worst bear market in crypto trading history. Since November 2021, when the total cryptocurrency market capitalization surpassed $3 trillion, it has fallen below $1 trillion to $934 billion, according to CoinGecko..
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