Trading platform Coinbase predicts that the demand for Bitcoin as collateral for algorithmic stablecoins will balance the increase in supply from MtGox compensation.
Cryptocurrency exchange Coinbase posted a report that the supply of bitcoin could rise sharply in the second half of 2022, when the implementation of a compensation plan for losses to former users of the MtGox exchange begins. The authors of the report added that 140,000 BTC have already been returned after the exchange was hacked eight years ago.
“We are monitoring the progress of the MtGox damage settlement to see when bitcoin payments totaling approximately $7 billion to $8 billion could potentially enter the market. This could happen as early as the second half of 2022 or could be delayed until 2023,” Coinbase said.
The report notes that the purchase of bitcoin by algorithmic stablecoin issuers could potentially offset the increase in BTC supply, which would unleash MtGox’s indemnity plan. The authors of the report cite Terraform Labs as an example. The developers of Terra (LUNA) announced in March that they would acquire $10 billion worth of bitcoin to support their UST algorithmic stablecoin. Coinbase predicts that similar plans by the Tron (TRX) team to support Level 1 (L1) smart contracts could be optimistic for Bitcoin.
“On April 21, the Tron project announced that it is using $10 billion in reserves to secure the USDD algorithmic stablecoin, scheduled to launch on May 5. Analysts say this could lead to similar purchases in the future. As more L1s follow in Terra’s footsteps, this evolving trend could provide a new tech support path for the crypto market,” the report says.
The authors of the report did not ignore Ethereum, noting that the transition from the Proof-of-Work to Proof-of-Stake consensus mechanism, which is expected in the second half of 2022, is optimistic for the second largest crypto asset in the market. Ethereum’s scaling solutions, known as Layer 2 (L2) networks, could lead to new categories of crypto investments. Coinbase believes that the continued growth and innovation in the cryptocurrency industry will generate interest among market participants.
Source: Bits
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