More Crypto Meltdowns Could Be Seen This Summer, but the Worst Is Behind Us - Pantera's Morehead
The crypto market will probably see “a few more” meltdowns similar to what happened with the Terra (LUNA) ecosystem and crypto hedge fund Three Arrows Capital, argues Pantera Capital CEO Dan Morehead. However, according to him, the majority of the contagion from current meltdowns has already been priced in.
Writing in his latest newsletter from Wednesday, Morehead said that despite already seeing three major crypto “meltdowns” with Terra, Three Arrows Capital, and Celsius (CEL), there could still be “a few more to come in the next month or two.”
Morehead warned that each of these meltdowns and bankruptcies is not an isolated event, but said they leave “a string of problems for their counterparties,” as has most recently been seen with Three Arrows Capital.
On the positive side, however, Morehead reminded readers that the crypto markets “are very efficient.”
“With a 70-90% downdraft we probably have worked through most of the problems. We think these events have mostly washed through the crypto space,” he wrote.
Further in the newsletter, Morehead also admitted that his fund – which is normally heavily focused on altcoins – has now taken on “a larger bitcoin allocation to reduce downside risk.”
It is typical during crypto bear markets that altcoins underperform bitcoin, Morehead explained, adding that this has also been the case this time. He added that the time to rotate out of bitcoin and back into altcoins will be “once it's very clear that the market's bottomed.”
Also in the newsletter, Pantera’s co-chief investment officer Joey Krug said that valuations in the crypto space have diverged, with lower valuations seen for tokens but higher valuations for equity in crypto start-ups.
As a result of this divergence in valuation,
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