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, or so a major US multinational investment bank says of its latest findings.

Multiple evidence indicates that the liquidity crunch in the broader cryptocurrency markets may have seen the worst. This is the conclusion proposed by Citi Bank in its latest study.

Its Peak Since November of last year, the value of Bitcoin has more than halved, causing the entire cryptocurrency market to plummet.

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Terra (LUNA) and TerraUSD (UST) both experienced precipitous declines, including Bitcoin, which alarmed a large number of investors.

Who would have predicted that when both cryptocurrencies were at their best a month ago, they would suffer such a painful crash?

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Bitcoin feeling the pain disappear

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

The global economic aftermath has exacerbated the problem, leading to lower token prices and a liquidity crisis. Nevertheless, there are now many indications that the worst is over.

Image - Bleeping Computer

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

Financial analysts recently told CNBC that they are not concerned about the full-fledged impact of crypto on the broader US economy because crypto is not tied to debt.

According to University of Toronto economist Joshua Gans:

“People rarely use crypto as collateral for bonds in the real world. Without it, it’s just wasted paper. Therefore, this issue is at the bottom of the list of economic concerns.

“Stablecoin and ETF outflows have started to show signs of stabilizing, and Coinbase’s discount has also returned to normal,” Citi said.

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

Not a dent in the economy

At $990 billion compared to the US stock market’s $34 billion, crypto remains too small to have a significant impact on financial markets, Citi’s analysis pointed out.

This assessment is comparable to that of Diego Vera of Buda.com, who stated that Bitcoin has been through many cycles in the past and has always bounced back “with a vengeance”.

Sam Bankman-Fried, CEO of FTX, admits the disaster was “worse” than he expected. According to a July 7 report from Reuters, the 30-year-old billionaire believes that the worst of the liquidity crisis has passed despite the ongoing crypto winter.

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

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