The team at Coinbase Institutional Research believes the events surrounding FTX have damaged investor confidence and will extend crypto winter through the end of 2023.
The FTX contagion continues to negatively affect the industry as more crypto projects and platforms halt customer withdrawals or declare their financial exposure to the platform to the tune of millions of dollars. At the same time, anxious crypto traders and investors have taken it upon themselves to safeguard their digital assets by moving them off exchanges and into cold wallets.
The Long Crypto Winter Will Get Longer Due to the FTX Contagion
It is with the above background the Coinbase Institutional Research team believes that the events surrounding FTX’s collapse will continue to be felt further down the road and extend the ongoing bear market.
They shared their analysis in a recent report titled ‘The Long Winter Gets Longer’ in which they warned that FTX’s collapse is a new ‘setback for the industry that may come at the cost of an extended crypto winter.’
According to their analysis, the crypto markets had already been weakened by the collapse of UST, which resulted in ‘significant deleveraging in May and June 2022.’ The events of mid-this year had ‘left few if any large marginal sellers in this space.’
Therefore, the collapse of FTX, its subsequent bankruptcy, and the ripple effects on the entire industry ‘has not helped investor sentiment towards the [digital] asset class.’
‘The unfortunate events surrounding FTX have undoubtedly damaged investor confidence in the digital asset class. Remediation will take time, and this could likely extend crypto winter by several more months, perhaps through the end of 2023 in our view,’ the team at Coinbase Research concluded.
Bitcoin Miners Are Also At Risk
Furthermore, the ongoing withdrawal of Bitcoin from exchanges by investors who do not want to be part of the subsequent crypto exchange collapse has resulted in increased volatility of BTC. As much as selling pressure has reduced from May and June, the current situation increases the chances of additional miner capitulation.
The report explained, ‘we believe it is unlikely that we’ve seen the last of bitcoin miner capitulation. Many operators have been amending and extending their outstanding debt contracts in an effort to stay afloat long enough for the variables impacting profitability to improve.’
（By John P. Njui）