Coinbase COIN has released a report stating that the recent turmoil in the U.S. banking industry has strengthened the medium to long-term outlook for the cryptocurrency market.
According to David Duong, head of institutional research at Coinbase, cryptocurrencies have demonstrated resilience, partly due to technical factors, but also because more people are beginning to appreciate the fundamental value proposition of having an alternative to the traditional financial system's points of failure.
The report also cites the Federal Reserve's policy of raising interest rates, which has led to falling treasury prices, reducing the value of bank portfolios.
This, in turn, has caused panic in financial markets and a decline in banking stocks globally, with Silvergate Bank SI, Silicon Valley Bank, and Signature Bank SBNY collapsing as a result.
The report argues that the technology underlying open blockchains and transparent smart contracts provides a stark contrast to the poor risk management practices that led to the turmoil witnessed in the U.S. banking sector.
This supports the case for digital assets as an alternative and viable solution to the points of failure seen in the current financial system, Coinbase says.
However, the report also cautions that in the near term, crypto businesses may face a more challenging operating environment due to the loss of some fiat payment rails.
Photo: Coinbase
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