By
Chimamanda U. Martha
April 25th, 2024
The Coinbase analysis of the current market spills a very troubling outlook for Bitcoin (BTC) miners in the space.
American multinational digital currency trading platform Coinbase Global Inc (NASDAQ: COIN) has waded into the current outlook of the crypto ecosystem following the collapse and eventual bankruptcy of rival trading firm, FTX Derivatives Exchange.
Coinbase Vision of the FTX Bankruptcy
In a research note, David Duong, CFA, Head of Institutional Research, and Brian Cubellis, Research Analyst acknowledged that the FTX saga has set the industry back as it can elongate the already troubling crypto winter.
“The drama around FTX upset what was otherwise an emerging positive setup for crypto as the significant deleveraging in May and June 2022 had left few if any large marginal sellers in this space. But the recent market turbulence and absence of large buyers has left the asset class vulnerable, potentially extending an already long crypto winter,” the duo said in the research note.
To Coinbase, there exists a significant uncertainty as to how the legal proceedings governing the FTX bankruptcy will go as the exchange’s parent company operates out of the United States where the bulk of its trading activities occurred. The exchange said the progression of the case and how well it impacts creditors have a close bearing on the US Federal Reserve and its targeted interest rate hikes.
“The bankruptcy proceedings at FTX will now be closely watched, although for the asset class, a lot also still depends on the path of US Federal Reserve interest rates. In our view, it’s still too early for a Fed pivot until inflation truly starts to tip over or we begin to see real weakness in the economic data,” the research reads.
The combined crypto market cap has slipped from the $1 trillion support it maintained prior to when the whole FTX debacle came into the public glare. The industry’s capitalization is now pegged at $828.35 billion per data from CoinMarketCap.
Coinbase Sees More Headwinds for Bitcoin Miners
The Coinbase analysis of the current market spills a very troubling outlook for Bitcoin (BTC) miners in the space.
There is no doubt that investors in general are facing a significant distrust that has made them taper down their mining activities in general. Amid growing inflation, the cost of energy and other mining resources have increased in ways that have made miners with old machines to be largely unprofitable.
Many top mining firms are now selling off their Bitcoin stashes while a host of others are pausing debt obligations until situations that favor BTC growth return to the horizon.
Coinbase as one of the major players in the industry has also felt the brunt of the crypto winter, laying off staff on at least 2 occasions the latest coming off this month. The exchange has reiterated its need to reduce costs in a bid to survive the current tough market conditions both in the short and long term respectively.