• The Deutsche Bank analysts say that Bitcoin could climb back up following the recovery in the U.S. equity market by the year-end.
• JPMorgan adds that the crypto deleveraging could be ending soon and a good portion of troubles could be behind crypto.

The world’s largest cryptocurrency Bitcoin (BTC) has come under intense selling pressure and is struggling to hold $20,000 for now. However, analysts at Deutsche Bank believe that Bitcoin holds the probability of surging by 40 percent from here to $28,000 by the year-end is highly likely.

With the fragile global macroeconomic conditions, investors have been moving to risk-off assets. Thus, investors have been pulling capital out of the crypto market and Bitcoin. The world’s largest crypto has been already down more than 50 percent year-to-date.

Deutsche Bank analysts Marion Laboure and Galina Pozdnyakova say that cryptos have been increasingly correlated to the U.S. Equity benchmarks like the S&P 500 and the Nasdaq 100. The bank’s strategists are confident that the S&P 500 will recover to January levels. Since the start of 2022, the S&P 500 (INDEXSP: .INX) is down more than 21 percent registering its worst performance in the first half of the year, for the worst time since 1970.

Related: Cryptocurrencies are forging the path of future finance as their inherent ‘demerits’ are working on: Deutsche Bank

However, the Deutsche Bank strategists predict that if the S&P 500 recovers to January levels, Bitcoin could follow soon. Time and again Bitcoin has failed to live up to investors’ expectations of an inflation hedge. In fact, amid inflationary pressure, Bitcoin and cryptos have corrected faster than equities.

Despite being positive about Bitcoin, the Deutsche Bank analysts warn about the troubles in the crypto space. The market turmoil in recent weeks has led to severe liquidity issues for crypto lenders and hedge-fund insolvencies. The analysts added:

Stabilizing token prices is hard because there are no common valuation models like those within the public equity system. In addition, the crypto market is highly fragmented. The crypto freefall could continue because of the system’s complexity.

JPMorgan: Crypto deleveraging could end soon

Deutsche Bank is not the only bank to be optimistic about Bitcoin. Wall Street banking giant JPMorgan also believes that the current phase of crypto deleveraging could be ending soon. In a note to clients on Wednesday, JPMorgan strategists led by Nikolaos Panigirtzoglou wrote”

“The current deleveraging cycle may not be very protracted,” given “the fact that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion” and that venture-capital funding, “an important source of capital for the crypto ecosystem, continued at a healthy pace in May and June.”

The deleveraging state of crypto firms suggests that either the assets have been sold willingly, via liquidation, or in a rush. This state particularly started with the collapse of the Terra ecosystem. This was later followed by the liquidity crisis at Celsius Network and crypto lender BlockFi. The insolvency of hedge fund Three Arrows Capital (3AC) is another major jolt to investors.

Related: Three arrows capital (3AC) liquidates its staked Ethereum holdings

JPMorgan believes that the worst could be behind us. Back in May when Bitcoin was trading at around $29,000, JPMorgan said that it can rally further all the way to $38,000 by year-end.