JPMorgan Analysts Say VC Funding Will Help Crypto Survive Post Terra Collapse

In a note shared with clients on Wednesday, analysts from JPMorgan Chase told investors that they see a limited spillover with respect to the recent collapse of the Terra blockchain protocol and its associated digital assets including LUNA and algorithmic stablecoin UST. 

As contained in a research note shared with investors on Wednesday, the analysts highlight the continuous influx of Venture Capital funding into the digital currency ecosystem despite the bad outlook of the Terra collapse. The analysts noted that $4 billion out of the total of $25 billion raised thus far this year in crypto capital raise were pulled after the UST stablecoin lost its peg a few weeks ago.

“Thus far there is little evidence of VC funding drying up post Terra’s collapse. Of the $25 billion VC funding [year to date], almost $4 billion came after Terra. Our best guess is the VC funding will continue and a long winter similar to 2018/2019 would be averted,” the report said. 

The analysts argue that the current crypto winter can be notably elongated should the VC funding that has generally showcased a broad reassurance to the crypto industry dry up.

Terra’s Collapse Had Minimal Knock-on Effect

The collapse of Terra according to the JPMorgan analysts had a minimal knock-on effect on the rest of the Decentralized Finance (DeFi) ecosystem. This is unusually surprising seeing the crash of LUNA dragged a lot of digital currencies by a mile, and there was an expectation that DeFi will follow suit seeing the protocol was the second-largest smart contract protocol prior to the crash.

The JPMorgan analysts see a very significant upside for cryptocurrencies, highlighting how they believe Bitcoin (BTC) may be grossly undervalued.

“The bitcoin to gold [volume] ratio has declined modestly towards 4x, which in our framework would suggested an unchanged fair value of around $38k implying significant upside for digital assets from here,” the report reads, corroborating earlier projections from the firm about the growth of Bitcoin in relation to Gold’s

“The past month’s crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally.” the analysts added.