FTX and crypto winter fears: ‘It was going to be a challenging market regardless’ say Coinbase
A monthly outlook report published by crypto platform Coinbase has outlined how the fallout from the collapse of FTX will have a knock-on effect across the industry and impact the crypto ecosystem for longer than expected.
As per the report, Coinbase said while the crypto sector had mostly been spared from wild price fluctuations, the fallout from FTX and complications between Binance and FTX led to consumer panic and withdrawals.
This quickly escalated into broader market instability and “concerns of potential systemic risk.” The report added:
The findings also outlined why FTX’s downfall had triggered a much wider issue in the crypto sector around trust and transparency – with investors losing confidence in crypto exchanges.
Several firms have reacted to news around FTX’s fallout, but Coinbase predicted the result of the ongoing liquidity crisis sparked by the exchange could easily extend until the end of 2023.
BTC to USD
Domino effect
As the chaos surrounding FTX continued to unfold, the crypto market witnessed increased volatility levels due to fear, with high volumes of withdrawals being made across crypto platforms.
Coinbase said consumer confidence and remediation will take time to rebuild, which will likely extend the crypto winter “by several more months”. The report stated:
The fallout of FTX has also raised concerns about the likelihood of other crypto exchanges facing liquidity challenges. Rumours have been swirling around that Crypto.com is facing potential liquidity issues, which led to mainstream contagion and users rushing to withdraw their deposits from the exchange.
Crypto.com CEO Kris Marszalek reassured users that the exchange was processing withdrawals as usual, and urged users not to spread fear and uncertainty.
Withdrawals are being processed as usual. No FUD please.
— Kris | Crypto.com (@kris) November 14, 2022
Reports of BlockFi facing liquidity pressures have also emerged, after The Wall Street Journal reported that the crypto firm could file for bankruptcy in the coming days.
BlockFi acknowledged the recent events in a statement that confirmed that the exchange could “no longer operate business as usual” and that it would determine “the best path forward.”
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