According to the 2023 Crypto Market Outlook study from Coinbase, market participants continue to have a strong hunger for digital assets despite recent market shocks.
DeFi better demonstrates trust and transparency qualities than failed centralized financial firms like Celsius, Three Arrows Capital (3AC), and FTX, according to Coinbase.
The desire for DeFi that combines institutional-grade compliance requirements with code-enforced openness may increase in the future.
“Borrowing in the crypto world has become very difficult in 2022 as a consequence of the credit withdrawals,” Coinbase said. However, lender impairment lingering following the implosion of Celsius and 3AC implies continued consolidation rather than “revived pressure on these businesses.” Following the demise of FTX.
More than likely, lending processes in the cryptocurrency field will mature, including underwriting criteria, suitable collateral, and asset/liability management, according to Coinbase.
According to the research, future loan inventory would be drawn from institutional investors rather than ordinary investors. Institutional credit activity may not return to pre-recession levels for a while, but “borrowing will likely not be a burden for credit-worthy, responsible borrowers” in the meantime.
“We believe investors’ desire to acquire altcoins has been adversely hurt by the deleveraging in 2022, and it might take many months to recover,” Coinbase added, referring to fresh projects exposed to FTX.
As for bitcoin miners, “precarious economic circumstances” show no indications of recovery, with mining businesses selling approximately “135% of coins produced every day.” This indicates that miners are liquidating all of their freshly obtained coins as well as sections of their BTC holdings.”
According to Coinbase, miners’ “greater input costs and lower output value” combined with the growing cost of electricity lead to a “very pressured economic situation.”
“Therefore, we anticipate a greater consolidation of the bitcoin mining business in 2023,” Coinbase added.
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Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.
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