Although the broader crypto market has rallied past $1 trillion recently, banking giant JPMorgan has flagged warning signs hinting at a longer crypto slump ahead.
The recent views amind the fast drying of venture capital in the crypto space. On Thursday, JPMorgan Chase & Co. strategist Nikolaos Panigirtzoglou said that the funding in the crypto space is running at a pace of $10 billion a year. This is one-third the pace seen last year.
During the third quarter of this year, VC funding in crypto touched a low of $4.4 billion. Amid monetary tightening and other macro factors, the demand for riskier assets has dropped considerably. The team at JPMorgan wrote:
“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”.
On Thursday, November 3, crypto exchange Coinbase also reported its third-quarter earnings with a net loss of $545 million. The company said that its transaction revenue has been strongly impacted by macro headwinds as well as crypto market correction.
Coinbase also stated that it doesn’t expect the crypto market to rebound swiftly from the current levels. On Thursday, the COIN stock price tanked another 8% ending the trading at $55.80. Over the last year, the COIN stock has corrected by 85%.
JPMorgan on Consumer Protection
In another development, JPMorgan said that banks will have to prioritize consumer protection as they embark on crypto-related experiments. In recent times, banks have been inching closer to the crypto industry to make their financial services more affordable and efficient.
However, proper security measures are essential to safeguard investors from cybersecurity risks. Speaking at the Singapore Fintech Festival 2022 earlier this week, Umar Farooq, CEO of JPMorgan’s blockchain unit Onyx said:
“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”.
To work on this, the banking giant is using a solution dubbed verifiable collections which would stay in the customer’s blockchain wallet. Whenever a consumer uses the protocol to trade, their credentials get verified.
“I can’t foresee people being able to send money across borders if no one checks and no one knows who’s sending money to who, because sooner or later they will be in a money laundering incident,” said Farooq.