Bitcoin ‘Back With A Vengeance’ – Crypto Liquidity Crisis Is Over, Citi Report Suggests

Bitcoin could see the proverbial light at the end of the tunnel, at least that’s what a major US multinational investment bank says about its latest findings.

Multiple evidence indicates that the liquidity crisis in the broader cryptocurrency markets has seen its worst. That is the conclusion suggested by Citi Bank in its latest investigation.

Since its peak last November, Bitcoin’s value has fallen by more than half, causing the entire cryptocurrency market to plummet.

Both Terra (LUNA) and TerraUSD (UST) have witnessed steep declines, including Bitcoin, which has alarmed a large number of investors.

Who could have predicted that when both cryptocurrencies were in their best shape a month ago, they would experience such a painful crash?

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Bitcoin feels the pain go away

As a result, investors withdrew their money from the crypto market, causing Tether (USDT) to lose its peg to the dollar and forcing some of the largest bitcoin companies to lay off a significant number of employees.

The global economic fallout exacerbated the problem, resulting in a drop in token prices and a liquidity crisis. Yet there are now plenty of indications that the worst is behind us.

Image - Bleeping Computer

Citi believes that while crypto markets are too small and relatively isolated to create a ripple effect on the financial sector or the economy as a whole, they can nevertheless influence investor sentiment. The bank’s assessment shows that contagion fears have likely peaked, at least temporarily.

Financial analysts recently told CNBC that they are not concerned about crypto’s full impact on the broader US economy due to the fact that crypto is not tied to debt.

According to a University of Toronto economist Joshua Gans:

“People rarely use crypto as collateral for real-world obligations. Without it, these are just paper losses. That is why this issue is low on the list of economic concerns.”

“Stablecoin and ETF outflows are beginning to show signs of stabilization, and Coinbase’s discount is also back to normal,” the Citi said.

Crypto total market cap at $1.06 trillion on the daily chart | Source: TradingView.com

No dent in the economy

At $990 billion compared to the US stock market’s $34 trillion, crypto remains too small to significantly affect financial markets, according to Citi’s analysis.

This review is similar to that of Diego Vera of Buda.com, who stated that Bitcoin has seen numerous cycles in the past and has always recovered “with vengeance”.

FTX CEO Sam Bankman-Fried admits the disaster was “significantly worse” than he expected. According to a July 7 Reuters report, the 30-year-old billionaire feels the worst liquidity turmoil has subsided despite the ongoing crypto winter.

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Featured image from The Coin Republic, chart from TradingView.com

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