A recent report by David Duong, the head of institutional research for leading American 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 U.S. banking turmoil has caused more people to 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 Turmoil Strengthened Crypto Outlook
In the report, Duong argued that poor asset-liability management and a challenging interest rate environment in the U.S. led to the recent banking distress. The past two weeks have seen several U.S. banks shut down, with others struggling with liquidity issues.
“Overall, we believe the medium to long-term outlook for cryptocurrencies has been reinforced 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 witnessed in the U.S. banking sector this week,” the researcher stated.
The banking crisis also stretched into European markets, with Credit Suisse, Switzerland’s second-largest bank, reaching its breaking point. Interestingly, as the turmoil continues, the crypto sector has seen notable growth, which Duong partly attributed to technical reasons.
“For its part, cryptocurrencies have exhibited some resilience, in part due to technical reasons. But also, we believe 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 Bull Run
Furthermore, the Coinbase researcher mentioned that the chaos could lead the Federal Reserve to make monetary policy decisions affecting financial markets. Although the situation has a wide distribution of possible outcomes, crypto businesses could face the challenges of fiat payment rails.
However, he believes that the crypto sector will create adequate redundancies with time to ensure smooth operations.
Meanwhile, Duong 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 Fed to return easy money policies that drove the last bull run.
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