In a market outlook report published on Dec. 20, Coinbase Institutional stated that the crypto winter will extend well into 2023, especially for altcoins.
Company analysts expect digital asset selection will transition towards “higher quality names” like Bitcoin and Ethereum. This is based on several factors, such as sustainable tokenomics, the maturity of respective ecosystems, and relative market liquidity.
They were not confident that altcoins would see much momentum next year.
“We think investors’ willingness to accumulate altcoins has been severely impacted by the deleveraging in 2022 and may take many months to fully recuperate.”
Bear markets are usually long, drawn-out affairs lasting at least 18 months if previous cycles are anything to go by. With this in mind, crypto markets may continue to consolidate at current price levels until the second half of 2023.
Coinbase confirmed the notion, stating that the confidence crunch will extend this downcycle “for at least several more months.”
It gave a low probability of crypto performance decoupling from traditional risk assets in the first few months of 2023. Coinbase also blamed FTX for an ongoing liquidity crunch:
“Constraints on liquidity may also disrupt normal market operations in the short-term as many institutional entities reckon with assets being locked up in FTX’s bankruptcy proceedings.”
The crypto beneficiaries will be higher-quality tokens and coins, according to the company, primarily Bitcoin and Ethereum.
Regarding those two, the report noted long-term holders of BTC had 85% of the circulating supply, and Ethereum’s dominance as the industry standard for smart contracts continues.
The report also said the movement to self-custody and decentralized finance will continue in the wake of the FTX collapse and Alameda imbroglio.
More regulations and investor safeguards in 2023 are also likely to spur institutional investor confidence, which could ultimately spell the end of crypto winter.
Digital asset markets have gained around 2% on the day, pushing total capitalization up to $846 billion. The momentum is still sideways, however, with minor ups and downs within a range-bound channel.
Bitcoin had climbed 1.7% to reach $16,867 at the time of writing, whereas Ethereum had made 2.2% to top $1,200 once again. The majority of altcoins were marginally up on yesterday’s levels at the time of writing, according to CoinGecko.