The FTX crisis has hampered investor confidence and created a liquidity crisis in crypto markets that could extend the crypto bear market until the end of 2023, according to a new report from Coinbase.
The report analyzes the collapse of the crypto ecosystem after the collapse of FTX byspecifyThe self-explosion of the world’s third-largest crypto exchange has created a liquidity crisis that could lead to an extended bear market.
Many institutional investors in FTX have their investments pending on the platform after it filed for bankruptcy on November 11 The FTX self-explosion has also deterred large investors and buyers from the ecosystem, with Coinbase highlighting that stablecoin dominance has reached a new high of 18%, suggesting that the liquidity crisis may be protracted. Until the end of the year at least
Stablecoin Dominance measures the dominance of stablecoins within the crypto ecosystem relative to the total market capitalization. As stablecoin dominance increases, it indicates that market participants are exiting crypto assets and into US dollar-pegged stablecoins.
Additionally, the crypto market could see a “second wave of impact” from potential lending counterparties to FTX or Alameda.
“The FTX event has undoubtedly undermined investor confidence in the digital asset space. And fixing it will take time. And most likely, this could prolong the crypto bear market for several more months. Or maybe even the end of 2023 in our view.”
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