The bitcoin price has crashed under $17,000 per bitcoin, down more than 70% from its all-time high of almost $71,000 set a year ago, with some fearing the crypto price crash could be about to go from bad to worse.
Now, analysts at Wall Street giant JPMorgan have issued a devastating bitcoin price prediction, warning the cryptocurrency could fall by another 25% following the FTX meltdown—even after the bank made a big bet on crypto.
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“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 within the crypto ecosystem,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note to clients see by Marketwatch.
The researchers said they expect the latest crypto crisis—coming after a series of failures this year—could push the bitcoin price to lows of $13,000 due to a “cascade of margin calls” in the aftermath of the FTX collapse, pointing to bitcoin production costs that are currently around $15,000 per bitcoin.
“Given the size and interlinkages of both FTX and Alameda Research with other entities of the crypto ecosystem, including DeFi (decentralized finance) platforms, it looks likely that a new cascade of margin calls, deleveraging and crypto company/platform failures is starting similar to what we saw last May/June following the collapse of terra”—an algorithmic stablecoin that was designed to be pegged to the U.S. dollar via its support coin luna. The terra luna meltdown caused a number of companies to declare bankruptcy.
This week, reports have revealed FTX is staring into a yawning black hole in its balance sheet that could be as big as $10 billion after comingling user deposits with Alameda’s trading funds. FTX this week filed for bankruptcy, estimating it has between $10 billion and $50 billion in assets and liabilities and more than 100,000 creditors.
According to JPMorgan’s analysis, the FTX crisis could “create a similar wave of deleveraging to that seen following the $20 billion terraUSD collapse last May” and “unless a rescue for Alameda Research and FTX is agreed quickly.”
However, the crypto community aren’t expecting a speedy resolution to the FTX-induced price crash.
“It will take weeks before we see the full extent of the damage done,” Anto Paroian, the chief executive of cryptocurrency hedge fund ARK36, said in emailed comments.
Despite the widespread price panic, some have pointed to previous market downturns as evidence of an eventual recovery.
“The market is taking a hit, but crypto’s volatility has historically led to shakeouts that ultimately strengthen the space in the long run,” Akeel Qureshi, core contributor to hubble protocol and Kamino Finance on the solana blockchain, said via email.