A recent report by David Duong, head of institutional research at major US crypto exchange Coinbase, suggests that crypto is the solution to the point of failure in the existing financial system.
The researcher opined that the recent banking turmoil in the US has made more people see and appreciate the value proposition of having an alternative to the system. In turn, the development has reinforced the long-term outlook for digital assets to the upside.
Banking turbulence strengthened the crypto outlook
In it report, Duong argued that poor asset and liability management and a challenging interest rate environment in the US led to the recent banking crisis. The past two weeks have seen several US banks closewith others struggling with cash flow problems.
“Overall, we believe that the medium to long-term outlook for cryptocurrencies has strengthened to the upside. The technology behind open, trustless blockchains and transparent smart contracts stands in stark contrast to the poor risk management practices that led to the turmoil seen in the US banking sector this week,” the researcher stated.
The banking crisis also spread to European markets, with Credit Suisse, the second largest bank in Switzerland, reaching its breaking point. Interestingly, as the turmoil continues, the cryptocurrency sector has seen remarkable growth, which Duong attributed in part to technical reasons.
“For their part, cryptocurrencies have shown some resilience, partly for technical reasons. But also, we believe that more people now appreciate the fundamental value proposition of having an alternative to the points of failure inherent in the traditional financial system,” he added.
Positioning for the next bullfight
Furthermore, the Coinbase researcher mentioned that the chaos could lead the Federal Reserve to make monetary policy decisions that affect financial markets. Although the situation has a wide distribution of possible outcomes, crypto companies could face challenges from fiat payment rails.
However, he believes that the cryptocurrency sector will create proper redundancies over time to ensure smooth operations.
Meanwhile, Duong revealed that Coinbase had seen an increase in institutional cryptocurrency purchases in recent weeks. Traditional and crypto hedge funds, private wealth entities, and traditional asset managers are positioning themselves for the Fed to return the easy money policies that fueled the latest bull run.
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