The financial troubles of major cryptocurrency hub FXT threaten to wreak havoc on crypto firms and transform how they’re run, JPMorgan strategists warned on Wednesday.
According to a research note cited by Business Insider, the analysts believe this will likely send the price of Bitcoin down 25% to $13,000 a coin.
Crypto players are likely facing demands from lenders to put up more collateral, and some may collapse under the pressure, the Wall Street strategists wrote. “It looks likely that a new cascade of margin calls, deleveraging and crypto company/platform failures is starting,” they said.
The JPMorgan team pointed out to the close links between FTX and its boss Sam Bankman-Fried’s trading firm Alameda Research, and the wider crypto space.
According to the report, Bankman-Fried, who had been heralded as the white knight of crypto, and even compared to Warren Buffett, now appears to be the one in need of rescue. “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 strategists said.
They indicated that the whole situation “creates a confidence crisis and reduces the appetite of other crypto companies to come to the rescue.”
It could take several weeks for the crypto turmoil to settle down, unless FTX is quickly rescued, the experts suggested. “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,” they said.
On Wednesday, Bitcoin dropped to its lowest level in nearly two years on news of the potential bankruptcy of Bankman-Fried’s company after the world’s largest crypto trading platform Binance abandoned plans to acquire FTX.
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