The cryptocurrency bear market, which has wiped more than $2 trillion off the value of coins, could soon come to an end.
That is the view of JPMorgan strategist Nikolaos Panigirtzoglou, who said an increasing willingness of larger crypto firms to bail out others – allied with $5 billion of venture capital funding in May and June – were signs that “deleveraging is well-advanced”.
Deleveraging is when a company attempts to decrease its total financial leverage – reduce debt – for example by selling off assets. It also applies to companies that have been liquidated.
The collapse of the Terra ecosystem sparked the market freefall, with crypto lenders BlockFi and Celsius running into liquidity issues and investment firm Three Arrows Capital collapsing under debt.
Panigirtzoglou did not make light of these earthquakes – they “suggest that the tremors from this year’s crypto market fall continue to reverberate” – but added: “The fact that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion.”
The $5bn of VC funding in May/June is $3.4bn higher than the same period in 2021, but down $2.2bn on March/April.
The value of the cryptocurrency market stands at $870bn at the time of writing, down from a high of $3tr.