The FTX drama has spilled over into the broader crypto market with another 10% crash in the past 24 hours. In less than a week, the broader crypto market lost 20% of its value, or $200 billion.
JPMorgan’s latest report shows that the crypto market is facing a “cascade of margin calls”, failure to respond to it could lead to major sell-offs in the market. According to JPMorgan strategists led by Nikolaos Panigirtzoglou, the price of Bitcoin could crash to as low as $13,000.
BTC price is already down 20% on the weekly chart. At press time, Bitcoin is trading down 11.75% at a price of $16,143 and a market cap of $309 billion. In a report released Wednesday, the JPMorgan team wrote:
“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 weak capital and high leverage decreases” in the crypto sphere.
JPMorgan on FTX-led crypto bloodbath
The FTX episode has spread like a contagion in the market. Additionally, there is a lot of drama with FTX chief Sam Bankman-Fried struggling to find new investors in the market. A day after announcing support for acquiring FTX’s non-US assets, Binance walked away from the deal on Wednesday.
Now, market analysts are very concerned that any potential bankruptcy of FTX will lead to contagion into other crypto outfits. As a result, investors are still accepting the FTX episode.
JPMorgan’s prediction of a further drop in the price of Bitcoin is based on the cost of producing Bitcoin for miners. As we know, with the falling Bitcoin price on the one hand and rising energy costs on the other hand, miners have been forced to liquidate their BTC holdings to cover their operational costs.
“At this time, this production cost is $15,000, but is likely to revisit the low of $13,000 seen over the summer months,” JPMorgan said.
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