Traumatized by FTX, the crypto market is not ready to turn the corner

Zilber

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The cryptocurrency market is bloodless. According to the Coinbase exchange, the situation is not going to get any better. As the list of FTX victims grows, the US platform predicts an endless phase of decline.



The FTX empire fiasco caused a real earthquake in the crypto ecosystem. In the days following the bankruptcy, many industry players met a liquidity crisis. This is the case of Genesis Trading, a New York cryptocurrency trading company, the BlockFi platform and the start-up NestCoin.

A blood-red market until the end of 2023?


Against this background, most of the big names in cryptocurrency are expecting the market remains in the red for months. The research arm of Coinbase, one of the major exchanges in the field, also estimates that the crisis will continue until the end of next year. Coinbase predicts a long “cryptocurrency winter”. This is a period when market valuation stagnates. This mainly happened between the beginning of 2018 and the end of 2020.

“Recent market turmoil and the absence of major buyers have left the asset class vulnerable, potentially extending an already long winter for cryptocurrencies.” Coinbase tells in a report published on November 15, 2022
The company takes care of it “new setback for the industry » could extend the period of crypto asset decline. Already marked by the fall of the UST last May, the market has indeed been on a downward trend for several months. King Bitcoin, whose price hovered around $70,000 last year, is now trading around $15,000. According to a study by the Bank for International Settlements (BIS), three quarters of bitcoin holders would also incur a loss compared to their initial investment.

A crisis of confidence hits Crypto


The report points the finger a serious crisis of confidence among investors. Indeed, prior to the whirlwind debacle, FTX was considered one of the most secure platforms in the industry. By violating the trust of its users, Sam Bankman-Fried, the founder of FTX, significantly penalizes centralized exchanges, such as Binance, Crypto.com, Coinbase or Bitpanda. In addition, a large number of investors are flocking to centralized platforms for security, fearing that the FTX debacle will infect other companies.

“The unfortunate events surrounding FTX have undoubtedly damaged investor confidence in the digital asset class. Plumbing will take timestates the Coinbase report.
To restore the lost trust, the platforms will have to show their credentials. Following leader Binance, several top players such as Crypto.com and Kraken have uploaded a Proof of Reserve. This is the analysis of an entity’s blockchain address list. This analysis makes it possible to prove to clients that a company actually owns its cryptocurrencies at a certain point in time. In the case of mass withdrawals, the platforms should theoretically be able to refund all their users.

While tarnishing the reputation of centralized services, the FTX debacle may also help shed some light so-called decentralized platforms. Unlike entities such as Binance or Crypto.com, these platforms are not charged with securing user funds. In addition, exchanges are done peer-to-peer, thanks to smart contracts (intelligent contracts) without the control of a centralized actor. Will these decentralized solutions drive the next bullish phase?

Source :

Coin base
 
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