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JPMorgan: With the end of crypto deleveraging, better days are ahead

Because stronger crypto firms have stepped in to save the industry amid significant deleveraging, a JPMorgan strategist believes that the worst of the bear market may be over.

According to a JPMorgan analyst, the historically significant deleveraging of the cryptocurrency market may be coming to an end, which could mark the end of the worst of the bear market.

JPMorgan strategist Nikolaos Panigirtzoglou expressed optimism in a note on Wednesday by pointing to firms' increased willingness to help out smaller businesses and a healthy pace of venture capital funding in May and June. Key indicators, according to him, support the evaluation: "Indicators like our Net Leverage metric suggest that deleveraging is already well advanced."

The Terra ecosystem collapsed in May, wiping out tens of billions of dollars and starting the deleveraging of major crypto firms, wherein their assets have been sold either voluntarily, urgently, or via liquidation. Since then, the cryptocurrency lenders BlockFi and Celsius as well as the investment company Three Arrows Capital have all encountered issues.

The severity of some crypto firms' deleveraging, according to Panigirtzoglou, "suggest that the tremors from this year's crypto market fall continue to reverberate." he continued.

Panigirtzoglou contends that deleveraging may be ending as crypto entities step in to rescue struggling businesses, saying: "The fact that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion.”

Sam Bankman-FTX Fried's exchange is reportedly putting itself in a position to increase its influence within the industry despite the tragedies affecting several blockchain companies, including Three Arrows Capital and Celsius. According to a report from Cointelegraph on June 30, there are rumors that FTX is offering to pay $25 million to purchase the BlockFi cryptocurrency lending platform. In a tweet on June 30, BlockFi CEO Zac Prince, however, refuted the rumors.

Also encouraging, in Panigirtzoglou's opinion, is the steady pace of venture capital funding in the cryptocurrency industry. JPMorgan estimates that in May and June, VC funding for crypto firms totaled about $5 billion. Dove Metrics, a tracking service for fundraising metrics, estimated crypto funding to be $8.6 billion in the same time frame using data from Airtable.

This funding rate is lower by $2.2 billion compared to March and April, but higher by $3.4 billion compared to May and June 2021.

The most recent forecasts from JPMorgan should give 2022 cryptocurrency investors new hope after they suffered through what Glassnode has dubbed the worst bear market in the industry's history. According to CoinGecko, since November 2021 when the total market cap of all cryptocurrencies exceeded $3 trillion, it has decreased below $1 trillion to $934 billion.



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