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Crypto deleveraging cycle won’t last much longer
Crypto companies with strong balance sheets are stepping in to contain contagion, strategists say Bank points to continued strong VC investment as sign shakeout will be short-lived Banking giant JPMorgan believes the current debt-fueled chaos in digital asset markets will soon come to an end. “Crypto companies with the stronger balance sheets are currently stepping in to contain the contagion,” said a report from the company’s strategists. According to the report, venture capital funding also weathered the turmoil and continued at a healthy pace in May and June. Companies with…
Crypto deleveraging cycle won’t last much longer
- Krypto-Unternehmen mit starken Bilanzen schreiten ein, um die Ansteckung einzudämmen, sagen Strategen
- Die Bank weist auf anhaltend starke VC-Investitionen als Zeichen dafür hin, dass die Marktbereinigung nur von kurzer Dauer sein wird
Banking giant JPMorgan believes the current debt-induced chaos in digital asset markets will soon come to an end.
“Crypto companies with the stronger balance sheets are currently stepping in to contain the contagion,” said a report from the company’s strategists. According to the report, venture capital funding also weathered the turmoil and continued at a healthy pace in May and June.
Companies with higher leverage are ultimately the most vulnerable in a bear market, the strategists wrote. These included Bitcoin miners who “took out loans to expand operations using their Bitcoins as collateral,” hedge funds who “used futures to leverage their positions,” and retail investors who “borrowed money through margin accounts to invest in various cryptocurrencies.”
Among the cash-rich crypto firms stepping in to stem the damage is cryptocurrency exchange FTX, which is closing in on a deal to buy struggling digital asset lender BlockFi, according to reports in Blockworks and other publications.
Venture capital firms also seem to be pushing crypto investments. Andreessen Horowitz broke records last month when she raised a $4.5 billion fund for crypto, and OP Crypto has reportedly just educated $100 million for early-stage crypto investments.
Although it is difficult to estimate how much further deleveraging still needs to occur, JPMorgan strategists said: "Indicators such as our CME futures-based net leverage metric suggest that this deleveraging is already well underway."
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The post Crypto Deleveraging Cycle “Won’t Take Much Longer” is not financial advice.