​Coinbase predicts the end of the crypto winter not earlier than 2024

What’s new? According to a monthly prediction by analysts at crypto exchange Coinbase, the collapse of the FTX trading platform has increased market volatility, potentially prolonging the already long crypto winter. The lack of large buyers has also made the digital asset class vulnerable. Experts note that the crypto market has not seen sharp price fluctuations since early July, but the liquidation of positions in FTX’s native tokens by the Binance crypto exchange led to a massive outflow of deposits from FTX and destabilized the market.

Coinbase’s prediction

What else does the prediction say? The relative stability of the crypto market was disrupted on November 6 when Binance CEO Changpeng Zhao announced that the company would completely liquidate its position in FTT. Earlier it was revealed that most of the capital of FTX-affiliated trading company Alameda Research consists of FTT.

It has since emerged that the hole in FTX’s balance sheet is between $8 billion and $10 billion, and it may be related to loans Alameda made at the expense of deposits by the exchange’s customers in FTT tokens. According to reports, the transfer of FTT to Alameda occurred during the bankruptcy of the Terra ecosystem, as well as the Celsius platform and hedge fund Three Arrows Capital in Q2 2022.

The deleveraging effects of those bankruptcies continue to affect the market, experts say. Margin calls on all outstanding loans were likely caused by a ~85% drop in FTT’s quotes between November 6 and 10.

FTX co-founder and former CEO Sam Bankman-Fried admitted in a tweet that he miscalculated users’ margin differences and that this is at the root of the current solvency issue. The entire FTX Group has since filed for bankruptcy.

Analysts at Coinbase believe that the case may be fraught with significant legal complications since there is no clear precedent of commercial law for cryptocurrencies. In addition, many FTX Group transactions took place offshore, so it is unclear what will be included in the process. On the other hand, the bankruptcy procedure may limit the impact on the entire crypto market, as US courts look for a safe outcome.

According to experts, the collapse of FTX has undermined investor confidence in the digital asset class and could extend the crypto winter for several more months, possibly until the end of 2023. In addition, depositors of crypto companies have already reduced their deposits due to concerns over US Federal Reserve System (Fed) policies and weak technology stock earnings.

Analysts believe another impact on the market will come when all FTX’s counterparty liabilities become known. Moreover, the digital asset class may feel the impact of institutional structures that have invested in FTX or are unable to withdraw assets from the exchange.

Earlier, analysts at JPMorgan believe that the collapse of the FTX exchange could push bitcoin to fall to $13 000. And research firm Fundstrat suggested that high market volatility would bring the asset’s rate below $10 000.

After the collapse of FTX, Binance exchange CEO Changpeng Zhao and Michael Saylor, head of MicroStrategy’s board of directors, called users for keeping digital assets in their own wallets. Billionaire. The same advice was given by SpaceX and Tesla CEO Elon Musk, who predicted a prolonged downturn in the crypto market.