According to JPMorgan, the latest cryptocurrency drop and move toward riskier altcoin bets resembles the 2017 crash.
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| Photo : Pexels |
- According to JPMorgan, the latest drop in cryptocurrency prices shows some similarities to the 2017 crash.
- According to Josh Younger of the company, buyers are starting to diversify out of bitcoin and ether and into riskier altcoins, similar to how they did at the end of the 2017 bull run.
- However, Younger claims that the cryptocurrency industry is more robust than it was in 2017.
The latest cryptocurrency sell-off, which saw bitcoin plunge more than 50% from its highs, resembles the crash at the end of crypto's previous bull run, according to JPMorgan's head of interest-rate derivatives policy.
According to Josh Younger in a Monday note, while the recent rise in overall cryptocurrency market cap has been more incremental than the 2017-2018 cycle, the wind down bears certain similarity to the crash.
He defined the speed and magnitude of the unwind as "eerily similar" to the previous cycle. And, as in 2017, investors have started to shift their focus away from bitcoin and Ethereum and toward Stable coins and altcoins. If the crypto frenzy proceeds, investors purchase more risky securities.
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| Photo : Pexels |
This dangerous pivot, along with negative sentiment signs and financial outflows, "should caution any perception that the worst is obviously behind us," Younger cautioned.
He did, however, agree that there are certain variations in the two intervals. This time around, the industry hasn't seen the silkiness that resulted from the ICO frenzy (initial coin offerings.)
In this cycle, there has also been more financial sponsorship, continued growth and growth of business networks, wider and cheaper availability of leverage, and the emergence of DeFi ventures, according to Younger.
The researcher suggests that crypto is in the midst of a "significant downturn," and while it is too early to call the edge, the durability of the crypto market system provides a "positive structural context" for a rebound.
"We continue to see signs of robust microstructure in cryptocurrency markets: the volatility surge continues to be quite regionally concentrated, sector depth is down but has not receded amid these moves, and derivatives trading has tried to improve rapidly enough to hold a reasonable fractions of the levered long base," Younger stated. "Much of this militates against the notion that we are in the middle of a self-perpetuating vicious spiral of market declines—a classic run scenario."
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| Photo : Market Insider |
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