The financial catastrophe currently imploding cryptocurrency exchange FTX is spilling over into the broader sector, threatening to take down the world’s largest digital token with it.
According to a JPMorgan note seen by Business Insider, the bank’s analysts project bitcoin will plummet by at least 25% to $13,000 thanks to the FTX fallout that’s plaguing the crypto sector. Investors in the space are likely being hit with demands from lenders to provide additional funds, increasing the risk that some might succumb to the financial pressure. “It looks likely that a new cascade of margin calls, deleveraging and crypto company/platform failures is starting,” the strategists wrote.
The note highlighted FTX founder Sam Bankman-Fried’s rise to become one of the most prominent champions of the crypto space, before losing 94% of his entire wealth within a span of 24 hours, leaving him in dire need of rescue. However, “the number of entities with stronger balance sheets able to rescue those with low capital and high leverage is shrinking within the crypto ecosystem,” the Wall Street analysts explained.
Unless the FTX blowout is resolved quickly, the carnage could continue escalating for several more weeks. “With the crypto market cap standing at just above $1 trillion before the FTX/Alameda Research collapse, our guess is that the crypto market will find a floor above $500 billion in the current deleveraging phase.” The price of bitcoin slumped to the lowest in almost two years following news of Bankman-Fried’s bankruptcy filing.
Information for this briefing was found via Business Insider and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.