According to the Coinbase team, FTX’s recent customer problems are just the beginning of a much larger issue in the world of cryptocurrency. They suggest that “second order effects” will extend the crypto winter until the end of 2023.
This is due to the fact that a significant amount of funds from large institutional investors were blocked indefinitely on the accounts of FTX and its subsidiaries, causing a liquidity crisis and an exodus of customers in the cryptocurrency market.
Coinbase analysts believe that this negative situation around FTX is just the visible tip of a larger decline in the interest of both retail and institutional investors in digital assets.
The problem seems to be more fundamental and broad-reaching, as “second-order effects” such as closure or temporary suspension of activities, changes in strategic priorities, and fears of possible contagion have led to a huge underutilization of the total value invested in cryptographic projects.
The liquidity available in the crypto market is currently fragmented across blockchains, staking pools, and applications, which creates inefficiencies for large transactions and becomes an obstacle to institutional participation.
This has caused fears and doubts among investors, leading them to turn their attention to more traditional financial instruments.
Coinbase CEO Brian Armstrong has recently called on users to vote for political candidates who support the crypto industry in order to counter the US SEC. In summary, FTX’s customer problems are just the tip of the iceberg, and the broader decline in interest among investors in digital assets will continue to have negative effects until at least the end of 2023.