Despite the bullish upticks over the past couple of days, with the overall crypto market cap yet again breaching $1 trillion, financial giants like JPMorgan believe that crypto is in for a prolonged crypto winter.
JPMorgan Chase & Co. strategist Nikolaos Panigirtzoglou commented that the rate at which crypto projects are financed by venture capital is currently calculated to be $10 billion per year, which is only a third of the annual capital inflows in 2021. Furthermore, the third quarter of 2022 saw VC funding in crypto reaching a low of $4.4 billion.
The primary reason for the VC funding drop is the monetary tightening, but other macro factors, like the demand for riskier assets, have dropped substantially over the past year.
“This is a concerning development as it shows reluctance by VC funds to deploy capital into the digital-asset space, increasing the likelihood that the current weakness in crypto markets would be long lasting”, JPMorgan wrote.
The banking giant, on the other hand, is drifting toward a customer protection-oriented approach to crypto experiments, as banks have been trying to incorporate cryptos into their financial services in order to make them more affordable and efficient.
“What a bank needs to do from a regulatory point of view and customer’s point of view is that we need to protect our customers. We cannot lose their money”, JPMorgan’s blockchain unit CEO stated in regards to safeguarding investors from cybersecurity risks.
Coinbase also goes down
America’s largest cryptocurrency exchange, Coinbase, also reported a slump in company revenue. Indeed, on November 3, Coinbase Inc. had its third-quarter earnings call, reporting that plunged more than 50% from the previous year earlier as trading activity plummeted. The result was a loss of $545 million compared to a profit of $406 million in Q3 2021.
“Transaction revenue was significantly impacted by stronger macroeconomic and crypto market headwinds, as well as the trading volume moving offshore,” Coinbase noted in its report.
A further delve into the figures reveals that the largest US crypto exchange lost 27% of its trading volumes - from $217 billion in Q2 of 2022 to $159 billion in Q3. Interestingly, Bitcoin’s lead against Ethereum seems to be fading, as Ethereum made a third of the total volume for the quarter, while Bitcoin transactions clocked in at 31%.
“For 2023, we’re preparing with a conservative bias and assuming that the current macroeconomic headwinds will persist and possibly intensify,” the exchange added.