JPM: A new wave of crypto fault is underway

wild times. Even Tradfi people are fixed Glot in the crypto cluster, but Nikolaos Panigirtzoglou from JPmorgan pursues the "investment class" longer than most Sellside analysts, so we thought we would share part of his latest report.

He points out that what makes this latest crypto cunt particularly poignant is that JPEG Morgan has now been imploded.

At the beginning of the crypto winter 2022, Sam Bankman-Frieds FTX and the connected Market-Maker Alameda Research plunged into several failed projects. Now the list of potential crypto rescuers looks pretty thin, emphasizes Panigirtzoglou:

What makes this new phase of debt removal even more problematic is that the number of companies with stronger balance sheets that are able to save those with little capital and high leverage is shrinking within the crypto ecosystem. FTX and Alameda Research had turned out to be the most important companies with apparently strong balance sheets last May/June in order to save weaker and more foreign companies such as Blockfi, Voyager Digital and Celsius. Now that the balance sheet strength of Alameda Research and FTX is questioned only a few months after being perceived as high -balance companies, this leads to a crisis of trust and reduces the appetite of other crypto companies.

In terms of "balance sheet strength", we should point out that the latest news is that SBF is currently asking around eight billion real dollars of emergency financing.

There is basically no significant balance.

ftAV is a (reluctant) member of some crypto discussion groups, and there is a lot of chattering about captive money in FTX and collective action. Many hedge funds used FTX because it was considered a "legitimate" than many of his competitors.

The debacle will inevitably raise regulatory questions again and force a large part of the crypto trade infrastructure to be more transparent about their stocks, argues Panigirtzoglou.

It is certain that the collapse of Alameda Research/FTX will increase the pressure of investors and supervisory authorities on crypto companies to disclose more information about their balance sheets, to protect customer assets, to limit the concentration of assets, and to provide more careful risk management, including the management of the counterparty, will cause risk under cryptom market participants. In particular, FTX was preferred by institutional customers such as hedge funds to Binance, so that the events of the past few days will probably change the way institutional investors interact with stock exchanges to ensure that their assets are protected. It is encouraging that nine stock exchanges, including Binance, Gate.io, Kucoin, Poloniex, Bitget, Huobi, Okx, Deribit and Bybit, have given explanations that they would publish their Merkle tree reserve certificates to increase transparency. Merkle trees enable Exchang to save the hash value of the assets of each user account in the leaf nodes of the Merkle tree. Assets on a leaf node can be checked and verified by third parties.

Panigirtzoglou believes that this wave will be less acute to debate crypto than that after the collapse of Terra/Luna, 3ac and Celsius at the beginning of this year, simply because the crypto universe has already shrunk so much.

He says that the JPM proxy has been at the lowest level for positioning Bitcoin Futures since January 2020, "which indicates a rather advanced debt reduction".

The debt relief phase, which followed Terra's collapse, had led to a decline in crypto market capitalization by 50 % from around $ 1.7 trillion at the beginning of May to a low of $ 0.86 trillion in mid-June. Since the crypto market capitalization was just over $ 1 trillion US dollar before the collapse of FTX/Alameda Research, we assume that the crypto market will find a soil over $ 500 billion in the current debt relief phase. Another way of thinking about the disadvantages from here are Bitcoin production costs, which historically acted as a lower limit for the Bitcoin price. At the moment, these production costs are $ 15,000, but it is likely that you will reach the low of $ 13,000 in the summer months. Production costs of $ 13,000 imply a downward trend of 25 %, which would bring crypto market capitalization to a low of $ 650 billion.

What does SBF do out of all of this? Who knows.

wtf He just played a league game pic.twitter.com/7ig5c2go2n

-Cl (@cl207) 10. November 2022