The gloomy mood hitting the crypto universe has continued since recent events. The analysis of the JPMorgan team, led by Nikolaos Panigirtzoglou, on the crypto situation is not reassuring. She indicated in a note that this market is facing a cascade of margin calls following the fall of FTX. The consequences on the entire crypto market could be disastrous. Bitcoin could dip to $13,000 not to mention capital solid companies shrinking significantly. It sure looks like the crypto winter is just beginning and it is likely to be a long one.
Crypto Market Faces “Margin Call Cascade”
The JPMorgan analyst team reported on the situation of the crypto market which is currently undergoing a phase of deleveraging. The latter is due to the apparent collapse of Alameda Research and FTX. According to Panigirtzoglou, the situation is all the more problematic due to the reduction in the number of entities with stronger balance sheets able to save those with low capital and high leverage.
A cascade of margin calls would therefore likely be underway given the ties between FTX, its sister company Alameda as well as the rest of the crypto ecosystem. The possible bankruptcy of the two companies founded by Sam Bankman-Fried risks dragging other cryptos down with them. This was noted by JPMorgan analysts who assessed the potential decline of cryptos like Bitcoin.
JPMorgan: the situation of FTX, unfavorable for the crypto sphere?
Predictions have revealed that Bitcoin could dive to $13,000. JPMorgan analysts have referred to the cost of producing crypto Bitcoin as a way to calibrate its continued fall. This cost mainly corresponds to the electricity that the Bitcoin network requires to operate. They said that production cost currently stands at $15,000, but could drop to $13,000 in the summer months. David Adams, portfolio manager of the King River Digital Assets Fund shares the same idea. This is also the case of Hayden Hughes, boss of Alpha Impact who indicated a drop to $13,800.
Moreover, one would think that the FTX company will not be out of the woods anytime soon. Binance indeed declared on Wednesday that it would not acquire FTX. Which contributed to the crash in crypto prices. The last episode that shook the crypto universe before this one dates back to May. This is the implosion of the stablecoin TerraUSD and its token LUNA.
According to JPMorgan, the impact on the overall crypto market value this time around will likely be smaller than last time around. The reason is that the TerraUSD incident has relatively reduced risk taking.
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