Severe Liquidity Shock Ahead for Bitcoin Market, Warns JPMorgan

Severe Liquidity Shock Ahead for Bitcoin Market, Warns JPMorgan:

(NewsBTC) A piece of excerpt allegedly taken from a JPMorgan & Chase’s report is warning its clients about a potential “liquidity shock” in the Bitcoin market.

The extract praises the cryptocurrency industry for improving its on-screen liquidity better than traditional asset classes on a relative basis. Nevertheless, it simultaneously warns about how most such liquidity provisions come from high-frequency-style traders who flee the markets when volatility picks up.

March Crisis

JPMorgan took the discussion back to March 2020’s global market rout, wherein liquidity shrank dramatically in the LIBOR, repurchase agreement, short-term commercial paper, and other large-volume money markets. The US dollar’s purchasing power soared, leaving even the safest of all US Treasuries in a critical condition.

Bitcoin was one of the victims of the said illiquid period.

It was not until the Federal Reserve decided to step in with its quantitative easing program that the global market recovered, taking the flagship cryptocurrency upward in tandem. The US central bank’s decision to slash interest rates to almost zero and buy government and corporate debts indefinitely prompted a lengthy bull cycle across stocks, bonds, gold, and even Bitcoin markets.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin reached its record high near $42,000 in January 2021. Source: BTCUSD on TradingView.com
Bitcoin reached its record high near $42,000 in January 2021. Source: BTCUSD on TradingView.com

The cryptocurrency has now rebounded by more than 700 percent from its mid-March nadir of $3,858. Nevertheless, its potential to pare those gains is higher as long as the global market anticipates a March-like liquidity crisis. Moreover, according to JPMorgan analysts, Bitcoin’s biggest liquidity risks come from within the cryptocurrency industry…

Continue to read the report at NewsBTC.

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