Morgan Stanley report reveals expectation of more crypto bankruptcies
Despite forebodings of a long crypto winter and the aftermath of the FTX crash, financiers believe crypto and blockchain will be increasingly used to trade financial assets in the future
A Morgan Stanley report showed that the industry expects further bankruptcies and deleveraging, CoinDesk reported. The results of a discussion of the industry's problems at the bank's "Cryptocurrency vs. Traditional Finance" event on Nov. 28 suggest that following the collapse of FTX and Alameda Research, "the market is re-evaluating the value of all project tokens issued" and trying to figure out "whether they were being used as leveraged assets."
However, despite the aftermath of the FTX collapse, financiers believe that crypto and blockchain will increasingly be used for financial asset trading in the future. Attention continues to be focused on building digital asset infrastructure, though some investors believe it could be 10-15 years before such assets become mainstream.
The current decline in the price of bitcoin is compared to its fall in 2017-2018 (the first cryptocurrency then also lost more than 70% of its previous high). However, the leverage of the crypto market in this cycle is greater than in the previous one. This is likely due to the fact that this time cryptocurrency institutions such as market makers, companies and investors have become the dominant traders in the market, whereas retail trading dominated in 2017-2018, the article says.
Morgan Stanley expects leverage to continue to decline, drawing attention to last month's decline in the capitalization of staplecoins, especially the largest of them, Target (USDT). That said, financiers noted that Alameda Research was the largest single recipient of the coin.
In addition, the report said that retail investors' interest in cryptocurrencies has declined, while demand for traditional financial products has increased.
Earlier, analysts at JPMorgan Chase & Co. predicted that due to a decline in leverage as a result of the FTX exchange crisis, the price of bitcoin could drop to $13,000.