For JPMorgan Chase & Co. analysts, the current crisis marked by high volatility observed in the cryptocurrency markets is as a consequence of a “margin call cascade.” This is due to the high interaction between the crypto exchange FTX, its sister company Alameda Research, and the rest of the crypto ecosystem.
A margin call is sent to investors to keep alerting them that their funds are below the minimum necessary for an open position. In the event of insufficient capital, the investor must add more funds to their account or close the position in order to reduce the required maintenance margin.
“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,” the team led by Nikolaos Panigirtzoglou said in a note.
The cataclysm…
