Bitcoin BTC/USD could plunge to the $13,000 level amid a "cascade of margin calls" in the wake of the ongoing crisis at the FTX cryptocurrency exchange, said strategists working for JPMorgan.
What Happened: The JPMorgan team led by Nikolaos Panigirtzoglou wrote in a note, seen by Bloomberg, "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 cryptocurrency environment.
Panigirtzoglou and his team used Bitcoin's production cost to gauge how much its price can drop.
"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."
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Why It Matters: The strategists said investors are still grappling with a liquidity crunch at FTX.com and Alameda Research — both founded by Sam Bankman-Fried. They said there are fears that the contagion could spread, reported Bloomberg.
On Wednesday, Binance said that after due diligence it would not be acquiring FTX, which led to a crash in the prices of cryptocurrencies.
Bankman-Fried reportedly told investors of FTX that without liquidity from Binance, the cryptocurrency exchange faces bankruptcy.
Bitcoin BTC/USD traded 10.4% lower at $16,450.70, while Ethereum ETH/USD dropped 10% to $1,178.50 at the time of writing. BTC and ETH hit intraday lows of $15,682.69 and $1,083.29 respectively.
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