August 16, 2022
Crypto winter May not last Too much longer Says JP Morgan

Crypto winter May not last Too much longer Says JP Morgan there are many signs of crypto markets finding bottoms, but they have not shown any signs of doing so yet. Considering that Sam Bankman-Fried is stepping in to support troubled companies, JP Morgan strategists believe the current crypto deleveraging cycle may not last long.

They said, 

 “The strategists noted that deleveraging may not last for very long, pointing out that crypto entities with stronger balance sheets played an important role in containing contagion, and venture capital, an important source of investment capital for the crypto economy, has continued to grow.”

Three Arrows Capital:

A number of indicators have been revealed by Three Arrows Capital as to whether the crypto market has actually located its base.

As a result of a lack of liquidity, and overleveraged crypto lending firms trying desperately to entice clients with higher returns, contagion has spread, and Three Arrows Capital has been liquidated, and other crypto funds may follow.

It shouldn’t be surprising that multiple companies in the industry have failed following deleveraging and a 70% fall in digital asset market capitalization since November, the report states.

It is this deleveraging process that contributed to the failure of 3AC, the note says, adding that the process seems well advanced, which is increasing volatility within the crypto market.

 As a result of stronger crypto companies with their own strong balance sheets, JPMorgan sees the cycle as not very protracted. At the same time, venture capital funders are continuing to fund the digital assets market at a healthy pace.

 It might not take long for the process of deleveraging to be completed, according to strategists at JP Morgan Chase & Co.

 Strategists predict that several companies will probably fail in the future, but there are reasons why this won’t last too long.

 Failure of 3AC:

It is this deleveraging process that contributed to the failure of 3AC, the note says, adding that the process seems well advanced, which is increasing volatility within the crypto market.

 Crypto Winter May Not Last Too Much Longer Says JP Morgan because they noted that venture capital (VC) funding has been a key source of capital for crypto ecosystems, and that it continues to grow at a steady pace in May and June.

 In a note published this week, JPMorgan strategists wrote that the liquidity crisis at Three Arrows Capital “is an expression of this deleveraging process.”

 Most of the challenges facing crypto companies are caused by weaker companies with high leverage and low capital levels. Planners are predicting that the current state may not last much longer & that even the deleveraging process may not last for very long however they do not exclude the possibility that many businesses may not succeed.

According to Longchamp, despite JPM’s prediction of a deleveraging event, bitcoin and other crypto-assets remain under pressure.

A view:

Deleveraging thoroughly is always the easiest and most effective way of filtering those who are weak and prone to risk.  After this has actually been done, the crypto market will certainly be able to rise again from its ashes with just the toughest and also most technically proficient jobs remaining.

Following that, crypto should see a strong rebound as the US Federal Reserve pivots at some point in the fall.

Withdrawals at record peak, but VCs save the day:

Crypto winter May not last Too much longer Says JP Morgan

Crypto reported recently that BTC withdrawals from exchanges reached the highest level in crypto history based on on-chain data.

In JPMorgan’s view, however, cryptocurrencies may be responsible for a large percentage of the current problems.

Analysts at JPMorgan believe the current deleveraging cycle may not last very long because crypto entities with better balance sheets are stepping in to help.

As for bitcoin and other crypto-assets, despite JPM’s speculation, Longchamp told CNBC: “We remain under pressure in this environment.

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