by Kevin Helms
Global investment bank JPMorgan has warned of the crypto market facing weeks of deleveraging stemming from the crisis at Sam Bankman-Fried’s crypto exchange FTX.com and trading platform Alameda Research. The firm’s analysts also predicted that the price of bitcoin could fall to $13,000.
JPMorgan Chase’s analysts, led by global market strategist Nikolaos Panigirtzoglou, provided their analysis of the FTX situation and a price prediction for bitcoin in a note Thursday.
The analysts explained that fewer players in the crypto space are now able to rescue weaker players, stating:
What makes this new phase of crypto deleveraging induced by the apparent collapse of Alameda Research and FTX more problematic is that the number of entities with stronger balance sheets able to rescue those with low capital and high leverage is shrinking.
Facing a liquidity crunch, FTX CEO Sam Bankman-Fried reportedly asked several major crypto exchanges, including Coinbase and Okx, for help. When they turned him down, he approached Binance despite CEO Changpeng Zhao (CZ) stating that his exchange is dumping all of the FTX tokens (FTT) on its books. Binance originally said it would acquire FTX and provide liquidity but after due diligence, the exchange walked away from the deal.
Crypto investors are concerned about the solvency of FTX.com and trading house Alameda Research. Bankman-Fried, who founded both firms, reportedly told FTX.com investors that his company needs a cash injection to avoid having to file for bankruptcy.
JPMorgan cautioned that a “cascade of margin calls” is likely underway given the interplay between FTX.com, Alameda Research, and the rest of the crypto ecosystem.
The global investment bank warned that the crypto market could face weeks of deleveraging stemming from the crisis at FTX, noting that a period of upheaval could drive the price of BTC down to $13K.
JPMorgan’s analysts use bitcoin’s production cost as a way of calibrating how much further the price of BTC can fall. They detailed:
At the moment, this production cost stands at $15,000, but it is likely to revisit the $13,000 low seen over the summer months.
At the time of writing, BTC is trading at $17,602, up 11% in the last 24 hours but down 13% in the past seven days.
What do you think about the warnings and predictions by JPMorgan’s analysts? Let us know in the comments section below.
A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.
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by Kevin Helms