• FTX scandal puts cryptoversum under pressure
• JPMorgan sees upward trend in Coinbase’s trading volume
• Ethereum upgrade could also have a positive impact on Coinbase
The effects of the FTX debacle on the crypto market are still clearly noticeable. Not only are cryptocurrencies listed well below their all-time highs, the bankruptcy of the crypto exchange is having such a wide impact that there have been numerous other crypto services that have had to file for bankruptcy as a result of the FTX crisis.
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Investors are turning their backs on crypto exchanges – except for Coinbase
So it is not surprising that many investors initially turned their backs on the crypto market. Other crypto service providers in particular, such as the Coinbase, Kraken, Gemini, Bitfinex, Binance or Uniswap exchanges, felt the effects. FTX rival Coinbase’s trading volume has steadily declined in 2022, according to data from US bank JPMorgan available to CoinDesk. Since the beginning of the new year, however, the tide has turned. The financial house found that the daily trading volume of the US crypto trading platform had risen again for the first time by the end of January, namely by 0.3 percent. However, other crypto exchanges have seen markdowns. So far, Kraken is down 13 percent quarter-on-quarter, Gemini is down 46.3 percent, while Bitfinex is down 25.5 percent in trading volume. Binance got off comparatively mildly with a minus of 6.2 percent.
JPMorgan finds Coinbase’s move into positive territory notable as it shows the trading platform has proven to be trustworthy in troubled times: “We believe that Coinbase has established a reputation as a reputable, trustworthy broker for some time,” and further: “We believe that reputation will help increase market share as activity levels recover.”
Another advantage of the online platform is that, unlike other crypto exchanges, it is not directly involved with FTX and was therefore relatively unaffected by the whole debacle.
Upside potential for Coinbase stock from Ethereum upgrade
But that’s not the only reason why the US bank is optimistic about Coinbase. As reported by Decrypt, the credit institution also sees an opportunity for the online platform in the next Ethereum upgrade, the Shanghai fork, which is planned for March. The Shanghai fork allows Ethereum stakers to withdraw their staking tokens (to become validators). In the course of the Ethereum merger, in which the cryptocurrency was changed from proof-of-work to proof-of-stake, users had the opportunity to stake 32 Ethereum to become network validators. It is worthwhile for users to become validators because they in turn receive a reward in the form of ETH for staking. So far, however, it has been impossible to withdraw the staked tokens. This is set to change with the Shanghai upgrade.
So why does JPMorgan now think this should have a positive impact on Coinbase? As Decrypt quotes the bank from one of its analyses, the Shanghai fork could herald “a new era of staking for Coinbase”. The financial house assumes that after the upgrade, 95 percent of small investors on Coinbase could participate in staking, which could bring the company annual revenues of between 225 and 545 million US dollars. So far, JPMorgan estimates that Coinbase would already make $50 million thanks to ETH staking. The crypto exchange could certainly use the additional income – the company is not immune to the currently difficult market environment and announced massive job cuts at the beginning of January.
However, JPMorgan points out that the described positive effects of the upgrade to Coinbase would depend on whether the platform allows its users to automatically become stakers when holding Ethereum, as is already happening with the cryptocurrency Cardano, for example. So far, however, Coinbase has not communicated any such intention. In addition, Coinbase users are of course also free to opt out of ETH staking should this new feature be implemented, but JPMorgan does not anticipate many users will miss the opportunity to “take advantage of the potential investment income.” benefit.
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