JP Morgan Envisions Good Days as Crypto Deleveraging Halts

The historically huge deleveraging of the crypto space may be nearing its end, which might mean that the worst of the bear market is over, as per a JPMorgan analyst.

JPMorgan strategist Nikolaos Panigirtzoglou expressed confidence in a note on Wednesday by pointing to enterprises’ increasing willingness to help out smaller businesses and a robust pace of venture capital investing in May and June. Key factors, according to him, support the evaluation:

“Net Leverage statistics and other indicators, deleveraging is already well under way.”

The Terra ecosystem crashed in May, wiping out tens of billions of dollars and starting the deleveraging of key crypto businesses, whereby their assets have been liquidated either voluntarily, urgently, or via liquidation. Since then, the cryptocurrency lenders BlockFi and Celsius as well as the investment company Three Arrows Capital have also encountered issues.

The severity of certain crypto businesses’ deleveraging, according to Panigirtzoglou, “suggests that the aftershocks from this year’s crypto market decline continue to resonate,” he continued.

Panigirtzoglou contends that deleveraging may be ending when crypto entities move in to rescue faltering businesses, saying:

“The stronger balance sheet crypto businesses are presently stepping in to assist control contagion,”

Sam Bankman-FTX Fried’s exchange is purportedly putting itself in a position to increase its influence within the market despite the tragedies affecting other blockchain companies, including Three Arrows Capital and Celsius.

According to a report from Cointelegraph on June 30, there are rumours that FTX is proposing to pay $25 million to purchase the BlockFi cryptocurrency lending business. In a tweet on June 30, BlockFi CEO Zac Prince, however, refuted the reports.

Lots of market rumors out there – I can 100% confirm that we aren’t being sold for $25M.

I encourage everyone to trust only details that you hear directly from @BlockFi.

We will share more w you as soon as we can.

— Zac Prince (@BlockFiZac) June 30, 2022

Also encouraging, in Panigirtzoglou’s opinion, is the steady rate of venture capital investing in the cryptocurrency industry. JPMorgan believes that in May and June, VC financing for crypto businesses totaled roughly $5 billion. Dove Analytics, a tracking service for fundraising metrics, estimated crypto financing 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.

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