(Bloomberg) — Crypto markets face weeks of deleveraging in the fallout from the crisis at digital-asset exchange FTX.com, a period of upheaval that could push Bitcoin down to $13,000, according to JPMorgan Chase & Co. strategists.
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A “cascade of margin calls” is likely underway given the interplay between the exchange, its sister trading house Alameda Research and the rest of the crypto ecosystem, a team led by Nikolaos Panigirtzoglou wrote in a note.
“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 low capital and high leverage is shrinking” in the crypto sphere, the team said Wednesday.
Digital-asset investors are still coming to terms with the rapid unraveling at FTX.com and the concerns swirling around Alameda Research, both founded by 30-year-old Sam Bankman-Fried. There are fears that the potential bankruptcy of FTX.com could lead to contagion that takes down other crypto outfits.
The strategists pointed to Bitcoin’s production cost as a way of calibrating how much further it can fall. The production cost is mainly the electricity needed to operate the powerful computers that run the Bitcoin network.
“At the moment, this production cost stands at $15,000, but it is likely to revisit the $13,000 low seen over the summer months,” they said.
The $13,000 level is one that other prognosticators are looking at too as a possible floor. David Adams, portfolio manager of the King River Digital Assets Fund, said that’s the price he’s calling for alongside a further fall in so-called alternative tokens. He added that “we’ll start to see value” at such levels.
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Hayden Hughes, chief executive of social-trading platform Alpha Impact, pointed to $13,800 as a potential support. Meanwhile, the history of previous routs suggests Bitcoin would need to fall below $13,000 to begin matching the magnitude of those drawdowns, according to data compiled by Bloomberg.
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