The largest cryptocurrency in the world, Bitcoin (BTC), has been under intense selling pressure and is struggling to hold $20,000 for now. However, analysts Deutsche Bank they believe that Bitcoin is likely to rise by 40% from here to $28,000 by the end of the year. With global macroeconomic conditions fragile, investors have been moving towards risk-free assets. Therefore, investors have been pulling capital out of the cryptocurrency market and out of Bitcoin. The world’s largest cryptocurrency is already down more than 50 percent so far this year. Deutsche Bank analysts Marion Laboure and Galina Pozdnyakova say that cryptocurrencies have become increasingly correlated with US equity benchmarks such as the S&P 500 and Nasdaq 100. The bank’s strategists are confident that the S&P 500 will recover to January levels. Since the beginning of 2022, the S&P 500 (INDEXSP: .INX) is down more than 21 percent posting its worst performance in the first half of the year, the worst time since 1970. However, strategists at Deutsche Bank predict that if the S&P 500 recovers to January levels, Bitcoin could soon follow. And again, Bitcoin Hasn’t Lived Up to Investor Expectations for an Inflation Hedge. In fact, amid inflationary pressure, Bitcoin and cryptocurrencies have corrected faster than stocks. Despite being positive on Bitcoin, analysts at Deutsche Bank are warning of trouble in the crypto space. The market turmoil in recent weeks has led to severe liquidity problems for crypto lenders and insolvency for hedge funds. The analysts added:
It is difficult to stabilize token prices because there are no common valuation models like those of the public capital system. Furthermore, the cryptocurrency market is highly fragmented. The crypto free fall could continue due to the complexity of the system.
JPMorgan: Crypto Deleveraging Could End Soon
Deutsche Bank is not the only bank bullish on Bitcoin. The banking giant of Wall Street, JPMorgan, also believes that the current phase of crypto deleveraging could end soon. In a note to clients on Wednesday, JPMorgan strategists led by Nikolaos Panigirtzoglou wrote:
“The current deleveraging cycle may not be very long,” given the fact that crypto entities with stronger balance sheets are currently stepping in to help contain contagion and that venture capital funding, “an important source of capital for the crypto ecosystem. It continued at a healthy pace in May and June.”
The state of deleveraging of crypto companies suggests that the assets have been sold voluntarily, through liquidation or in a rush. This state particularly began with the collapse of the Terra ecosystem. This was later followed by the liquidity crisis at Celsius Network and crypto lender BlockFi. Hedge fund insolvency Three Arrows Capital (3AC) it’s another big jolt for investors.
Related: Three arrows capital (3AC) liquidates its holdings in Ethereum JPMorgan believes the worst may be behind us. In May, when Bitcoin was trading at around $29,000, JPMorgan said it may go even higher to $38,000 by the end of the year.