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JPMorgan Analyst Says Cryptos’ Slide Is Nearing End

Cryptocurrency traders have been counting major losses as crypto prices tumbled in recent weeks. For many investors who were hoping to earn a quick buck from the cryptocurrency market, the past few months have been a sobering moment. Bitcoin, the largest cryptocurrency on the globe, dropped from an all-time high of $69,000 in November 2021 to $19,165 by the end of June.

Plenty of crypto investors have lost money due to the market slump, and the future looks grim at best. However, a JPMorgan analyst has predicted that there will be a light at the end of the tunnel. The strategist predicts that the crypto crash is nearing its end as crypto companies in the red turn to deleveraging as a last resort. Deleveraging is when an individual or company reduces its debt obligations by either making cuts, selling assets or raising capital.

In the wake of the Crypto Winter and the collapse of the TerraUSD (UST), several cryptocurrency entities have taken to deleveraging to reduce their leveraged positions, which is a fancy way of saying clear their debts. JPMorgan managing director and strategist Nikolaos Panigirtzoglou noted an increase in deleverage positions as prices dropped, stating that indicators such as JPMorgan’s net leverage metric indicated advanced deleveraging was already underway.

However, the historic deleveraging may soon be coming to an end, bringing with it good fortunes for the embattled crypto market, the JPMorgan analyst believes. Panigirtzoglou says that one reason for this prediction is the fact that cryptocurrency companies with stronger balance sheets are keen on containing the market crash before it spreads further. These companies are now stepping in to bail out the crypto industry as companies with weaker balance sheets focus on deleveraging.

For instance, Bahamian cryptocurrency derivatives exchange FTX  provided a $250 million line of credit to struggling crypto lender BlockFi on June 21, 2022. Less than two weeks later, BlockFi cofounder and CEO Zac Prince said that the two companies had signed a deal that could see FTX acquire BlockFi for up to $240 million.

JPMorgan’s forecast was also guided by the fact the bearish crypto market has not had a significant effect on venture capital funding. Investors provided $5 billion in funding from May to June even as major cryptocurrencies such as Bitcoin lost more than 50% of their value. This healthy rate of venture capital funding coupled with the readiness of financially stable companies to bail out struggling companies was the basis of his optimism, Panigirtzoglou said.

Such positive predictions will be a welcome breath of fresh air to crypto companies such as Bit Digital Inc. (NASDAQ: BTBT), which have seen the cryptocurrency world take quite a beating lately.

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