Before the collapse of FTX, the crypto market appeared to be on the path to positivity. However, from the end of October until the first few days of November, cryptocurrencies like Bitcoin and Ethereum started to show signs of recovery.
Bitcoin rose above the $21,000 zone, and Ethereum almost reached the $1,800 resistance. Several other altcoins rose alongside the top two, and the entire crypto market turned bright green.
However, it all went sour following the crash of the now-defunct crypto exchange. Greens turned into reds, and prominent cryptocurrencies like Solana and FTT (the native cryptocurrency of FTX) crashed so drastically that their names dominated the topics of several tweets and internet articles for days.
However, the FTX crisis may lead the crypto market's winter to last longer than previously thought, according to Coinbase's most recent monthly outlook.
Coinbase's latest publication suggests that the recent dip in the crypto market may not end things after all.
It also suggests that Bitcoin and several other altcoins may suffer more due to the large number of third parties who connected with or provided financing to either FTX or Alameda before the crash.
The FTX crisis, according to Coinbase's report, has caused investors to lose faith in centralized crypto exchange platforms and has also caused a liquidity crisis in the market.
This liquidity crisis, Coinbase speculates, could easily persist until the end of 2023. Therefore, the publication also assumes that the third-largest cryptocurrency exchange in the world (FTX) going under will likely have lasting effects on the rest of the industry.
On 11 November, FTX filed for bankruptcy after its 8- 10 billion dollar hole in its balance sheets.
As a result of these glaring financial issues, several institutional and individual investors transacted or invested in the exchange still have funds stuck in it.
This black hole of customer and investor funds has, in a sense, instilled fear in potential investors.
The crash of FTX also caused massive withdrawal volumes from crypto exchanges that mirrored that of the Terra ecosystem crash earlier in May this year.
Overall, stablecoin dominance has reached an 18% high against the global crypto market cap, which has decreased to roughly $800 billion as of 12 November from about $1 trillion at the end of last month.
Coinbase speculates that this low liquidity could last until at least the end of the year.
The publication also suggests that Bitcoin miners are experiencing increasingly tricky conditions due to the mining hashrate, rising energy costs, and the decline in the price of the cryptocurrency.
It also states that many of them will be forced to shut down in the coming months. As a result, the mining sector will consolidate as more well-funded players purchase the equipment at competitive prices in the upcoming year.
The key takeaway from the publication is that since the strong USD trend has made it difficult to hold positions in long-duration assets, the performance of cryptocurrencies across the market depends highly on what happens with US interest rates in the future. All in all, most cryptos have started recovering after the whole FTX debacle.
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