JPMorgan strategists led by Nikolaos Panigirtzoglou said in a note to clients Wednesday.
“Given the size and interlinkages of both FTX and Alameda Research with other entities of the crypto ecosystem including DeFi platforms it looks likely that a new cascade of margin calls, deleveraging and crypto company/platform failures is starting similar to what we saw last May/June following the collapse of Terra,” JPMorgan’s strategists said in their note to clients. DeFi, or decentralized finance, is an umbrella term for a variety of financial applications carried out on blockchains.
JPMorgan said investors can potentially look for a bottom in bitcoin (BTC) pricing through its production cost, which has sometimes acted as a floor. The current production cost is about $15,000, though it's likely to revisit the $13,000 it hit in recent months, implying a decline of around 25% from here, the bank noted.
On the optimistic front, JPMorgan said the hit to crypto’s overall market cap may be less than after Terra as deleveraging has been occurring.