A few days ago in a report by JPMorgan Chase & Co. it was written that the current Bitcoin and crypto bear market might be coming to an end.
Summary
According to JPMorgan, the crypto market decline may be coming to an end
This was reported by Bloomberg, revealing the contents of a note by some strategists at the well-known investment bank, including Nikolaos Panigirtzoglou.
This note argues that the current phase of cryptocurrency deleveraging is in such a decidedly advanced state already that it may not last much longer.
Panigirtzoglou also argues that the various recent failures of crypto companies or funds should not come as much of a surprise, because the huge drop in prices and high leverage have made them very vulnerable.
This dynamic would be part of the current deleveraging process, which according to JPMorgan strategists, may not be very long.
The note, however, does not state exactly how much longer it could go on or what might happen next.
The key point that hints at an imminent end to this process is the fact that some crypto companies with stronger balance sheets are stepping in to help contain contagion. As such, venture capital funding, an important source of capital for the crypto ecosystem, continued “at a healthy pace” between May and June.
Moreover, the note states that a good portion of the problems that have plagued crypto markets in recent months may now be behind us, seeing that metrics such as companies’ net leverage suggest that deleveraging is already well advanced.
Indeed, it has been more than three weeks since, for example, the price of Bitcoin been lateralizing around the $20,000 mark, and although the problems cited in JPMorgan’s note have continued to plague the crypto markets in the recent period, this threshold has shown some resilience.
The correlation between the crypto market and the US stock market
It is worth noting, however, that the trend of the crypto markets is following rather closely that of the Nasdaq, and the US markets in general, so in the event of a further fall in these indexes, it is difficult to imagine that cryptocurrency prices will be able to hold up.
However, the fact that the value of the Nasdaq 100 index has fallen back to the highs it touched in December 2017, which were touched again in late 2020 before the big bull run of 2021 was triggered, makes it possible to believe that the deleveraging process is coming to an end.
Moreover, the price of Bitcoin is at the highs of December 2017, and at the highs of late 2020 before the big bull run was triggered.
In other words, it seems that the 2021 speculative bubble has finally burst, returning these indexes to a kind of normalcy.
As noted by Investing.com’s Italian Site Manager Francesco Casarella, the central banks first provided large amounts of liquidity to the markets, then stopped doing so and raised rates, instilling caution in investors, which then spilled over mostly to riskier assets.
Investing.com analyst Calogero Selvaggio comments on this situation, saying:
“While investors are reaching their maximum pain threshold, moments like this have proven to be crucial for those who invest, rebalance their portfolios and revalue projects that have real value even in a bearish market.
On the other hand, if one does not focus only on the price or the bottom, it is evident how the adoption process is continuing and is not something transient, despite the fact that what gave further confirmation of the sell-off was the breaking of the 200-day average that has historically supported the price in times of high volatility. It is worth noting that no investment strategy works 100%, but requires ability to reposition according to situations and one’s risk tolerance”.
This would be confirmed by some large companies that, despite the period, are investing in the development of digital currencies, such as Vueling, Visa, eBay, and Shopify.
