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FTX and crypto winter fears: ‘It was going to be a challenging market regardless’ say Coinbase

By Alara Jordan

Edited by Charlie Mellor

17:01, 16 November 2022

Cryptocurrency digital coins
Coinbase outlined how FTX’s fallout has escalated into “concerns of potential systemic risk” – Photo: Shutterstock

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 recent market turbulence and absence of large buyers has left the asset class vulnerable, potentially extending an already long crypto winter.”

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. 


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.


3,495.18 Price
-1.000% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00


0.58 Price
-2.750% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168


173.24 Price
-0.960% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652


66,790.65 Price
-1.060% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

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:

“Truthfully, it was going to be a challenging market regardless, as traditional risk assets still need to reckon with the high likelihood of a US recession in 1H23.”

The fallout of FTX has also raised concerns about the likelihood of other crypto exchanges facing liquidity challenges. Rumours have been swirling around that is facing potential liquidity issues, which led to mainstream contagion and users rushing to withdraw their deposits from the exchange. CEO Kris Marszalek reassured users that the exchange was processing withdrawals as usual, and urged users not to spread fear and uncertainty. 

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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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

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