Recent Bitcoin Liquidation Will Have “Limited Impact” on Cryptos

While Ripple’s win against the SEC had spurred a rally in bitcoin’s price, a sharp correction reversed the trend on Friday, August 18, prompting liquidations of long and short positions estimated at over $1 billion. If the repercussions of this brutal correction continue, the investment bank JPMorgan Chase & Co publishes a report which indicates that the impact on bitcoin in the short term will be rather limited. Details.

In short

• The recent sell-off caused the cryptocurrency market to lose a billion dollars in 24 hours.
• JPMorgan Chase analysts believe the impact of this liquidation will be limited in the short term.
• Regulatory uncertainty is still a problem and could affect the crypto market in the long term.

Liquidation of long bitcoin positions appears to be coming to an end

According to a research report released last Thursday by JPMorgan Chase & Co.the recent liquidation of over a billion USD in crypto on Friday, August 18 appears to be coming to an end after analysis of data on the Chicago Mercantile Exchange.

Analysts at JPMorgan Chase & Co., note clear interest in Bitcoin CME futures contracts and a noticeable decline in open long positions. For them, the fall of BTC should be short-lived. This means that investors should hope for a somewhat more sustainable recovery in the price of bitcoin and other cryptos.

The causes of the price correction of the queen of cryptos on August 18 identified

The JPMorgan report attributes the violent correction of August 18 to a statement by the Chairman of the Federal Reserve, Jerome Powell. The latter indicated that the US central bank could raise interest rates again if necessary and keep borrowing costs high until the inflation rate is in line with expectations.

Analysts also point to the announcement that Elon Musk’s SpaceX company has sold some of its bitcoin holdings and the broader correction in risky assets such as stocks, which was prompted by “positioning in technology, higher US real yields and growth concerns over China.”

The sensitivity of crypto markets to regulatory uncertainty is sobering

Based on past events, it is clear that crypto markets are sensitive to regulatory uncertainty. This poses a problem, as the SEC prepares to appeal the court’s decision in its lawsuit against Ripple. However, we should not expect an outcome in the case before next year. As the JPMorgan report states, this “new wave of legal uncertainty” could affect crypto markets.