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Per a report from BNN Bloomberg, strategists from JPMorgan have noted that the ongoing crypto crisis or deleveraging has hit an advanced stage and recovery might be on the way.
Firms with higher leverage are more vulnerable to the contagion
Strategists from JPMorgan noted on Wednesday that the ongoing crypto contagion which has seen the declaration of bankruptcy by at least one VC might come to a stop soon, they added that the recent events are not shocking because it is expected when price declines heavily.
They also pointed out that firms who utilized higher leverage in the past are more susceptible to the contagion citing Three Arrows Capital as an example, the strategists which included Nikolaos Panigirtzoglou described the liquidity woes in the firm as a sign of “this deleveraging process”.
Furthermore, they continued, another indication that this deleveraging pattern might hit a dead-end soon is the support beleaguered firms are receiving from stronger companies. FTX has given credit facilities to a few affected crypto firms, and investors haven’t shown disinterest despite the downturn.
The entire crypto space has suffered massively during this time, with the crypto market cap coming down from a former high of $3 trillion to less than a trillion. However, the strategists firmly believe the worst has passed and the industry might very well be on its way to recovery.
