Despite the significant drop in prices lately, a JPMorgan analyst concludes that the cryptocurrency market is more resilient now compared to that of 2017 and 2018.
The slump that started with the moves of Elon Musk and was fuelled by the news that came from China, confirming its negative attitude towards cryptocurrencies, ended in one of the most violent falls in the market.
Within a few days we saw bitcoin “diving” from the $50.000 range to the $30.000 range, with most other cryptocurrencies fluctuating even more. Although the above reasons could be considered as the beginning of the collapse, the situation worsened when traders began to see their over-leveraged positions being liquidated.
The head of JPMorgan’s derivative interest rate strategy, Josh Younger, also devoted himself to this noble occupation. As Bloomberg informed us, the analyst described the similarities of this market gap with what happened in early 2018, a period that proved to be the beginning of a downturn that lasted all year.
However, Younger described some important differences as well, including market volatility, which came mainly from North America this time.
The second, and perhaps even more notable, difference that Younger pointed out was the state of the market after the collapse. He noted that the cryptocurrency space reacted quite well to the descent of 50% with fast recoveries on all charts.
“We continue to see evidence of resilient microstructure in cryptocurrency markets: the rise in volatility seems somewhat localised, the depth of the market has diminished but has not been kept afloat and derivative pricing has managed to adjust quickly enough to maintain a decent share of the leveraged long base”.
The analyst concluded that all of the above are positions “against the view that we are in the middle of a self-sustaining vicious cycle of falling prices – a classic execution scenario”.