Investment bank JPMorgan has warned that the crypto-currency market is facing deleveraging weeks following the crisis at Sam Bankman-Fried’s FTX.com crypto-currency exchange and trading platform Alameda Research. The firm’s analysts also predicted that the price of bitcoin could fall to $13,000.
JPMorgan on FTX and the price of bitcoin
JPMorgan Chase analysts, led by global market strategist Nikolaos Panigirtzoglou, provided their analysis of FTX’s situation and a bitcoin price prediction in a note Thursday.
The analysts explained that fewer players in the crypto space are now in a position to save weaker companies, 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.
Faced with a liquidity crunch, FTX CEO Sam Bankman-Fried reportedly asked several major crypto-currency exchanges, including Coinbase and Okx, for help. After being turned down, he turned to Binance, though CEO Changpeng Zhao (CZ) has said his exchange is getting rid of all FTX (FTT) tokens on its books. Originally, Binance said it would acquire FTX and provide cash, but after due diligence, the exchange pulled out of the deal.
Crypto-currency investors are concerned about the solvency of FTX.com and trading house Alameda Research. Bankman-Fried, who founded both companies, reportedly told FTX.com investors that his company needed a cash infusion to avoid having to file for bankruptcy.
JPMorgan warned that a “cascade of margin calls” is likely ongoing given the interaction between FTX.com, Alameda Research and the rest of the crypto ecosystem.
The investment bank warned that the crypto-currency market could face weeks of deleveraging stemming from the FTX crisis, noting that a period of turmoil could drive down the price of crypto-currencies. BTC down to $13K.
Analysts at JPMorgan use the cost of producing bitcoin as a way to calibrate how much the price of bitcoin is likely to fall. BTC may fall. They detailed:
At the moment, this production cost is $15,000, but it is likely to fall back to the $13,000 low seen during the summer months.
At the time of writing, BTC is trading at $17,602, up 11% in the past 24 hours but down 13% in the past seven days.