Coinbase, a leading US-based cryptocurrency exchange, has stated that the recent turmoil in the US banking system has reinforced the long-term outlook for cryptocurrencies. With the significant challenges faced by banks, such as the COVID-19 pandemic and the Federal Reserve’s response, many people have begun considering alternative financial systems. As a result, Coinbase sees this as a critical period for digital currencies, with the potential for wide-scale adoption in the future. Despite short-term fluctuations in the price of cryptocurrencies, Coinbase believes that they will continue to gain momentum as investors seek more secure and resilient financial options.
Crypto: The Solution to the Point of Failure in the Existing Financial System
A recent report by Coinbase’s head of institutional research, David Duong, highlights how the recent banking crisis in the United States has further strengthened the long-term outlook of digital assets. The research indicates that poor asset-liability management and a challenging interest rate environment in the US led to current banking distress. The past few weeks have seen several US banks shut down, with others struggling with liquidity issues. In contrast, cryptocurrencies have exhibited resilience and notable growth, partly attributed to technical reasons, but more people now appreciate the fundamental value proposition of having an alternative to the points of failure inherent in the traditional financial system.
Banking Turmoil Strengthened Crypto Outlook
As Duong argued in the report, the technology behind open, trustless blockchain and transparent smart contracts stands in stark contrast to the poor risk management practices that led to the recent turmoil in the US banking sector. The researcher believes that the current situation reinforces the medium to long-term outlook for cryptocurrencies to the upside.
Positioning for the Next Bull Run
Duong further disclosed that Coinbase had recorded increased institutional crypto purchases in the past few weeks. Traditional and crypto-native hedge funds, private wealth entities, and traditional asset managers are positioning for the return of easy money policies that drove the last bull run. Moreover, the chaos could lead the Federal Reserve to make monetary policy decisions affecting financial markets, and crypto businesses could face the challenges of fiat payment rails. However, the researcher believes that the crypto sector will create adequate redundancies with time to ensure smooth operations.
The recent banking turmoil has highlighted the existing financial system’s point of failure, leading to more people appreciating the value proposition of having an alternative to the system. Cryptocurrencies have exhibited resilience, and their fundamental value proposition as an alternative to the points of failure in the traditional financial system has been reinforced. Traditional and crypto-native investors are positioning for the next bull run, indicating a strong long-term outlook for digital assets.