After the events of FTX, we might wonder if other platforms like Coinbase, which have struggled during this bear market, might follow the same path. Let’s look at the evidence to try and assess the risk.
Coinbase faces bear market difficulties
When the FTX case shows that even the biggest platforms are not immune to major difficulties, it is legitimate to ask who else it could happen to. In these reflections, we can, for example, wonder about Coinbase, which has been experiencing some difficulties since its IPO.
Indeed, while the stock was introduced at $429.54 on 14 April 2021, it is now trading at $50.83. Even the attempt to rebound this summer was aborted, and the share price has since been more than halved:
Coinbase share price
The company’s quarterly balance sheet numbers are hardly more engaging with $572 million in total net revenue, compared to $1.235 billion in Q3 2021. When compared to the first and second quarters of this year, these revenues were $1.165 billion and $803 million respectively.
The number of average monthly active users is also down, from 8 million to 9.2 million compared to the previous quarter.
The German financial regulator’s warning
Beyond its financial results, it seems that Coinbase is also facing difficulties with the German financial authority (BaFin).
The company has a regulated entity in the country and BaFin has issued an order, asking Coinbase to review its organisation in order to address certain regulatory breaches:
An audit of the annual accounts revealed organisational deficiencies in the company. The regularity of the company’s organisation was not demonstrated in all areas audited. “
While BaFin did not provide concrete details of the deficiencies in question, a spokesperson for the exchange assured our colleagues at CoinDesk that Coinbase was cooperating fully with the authorities to resolve the situation.
Should we be concerned about Coinbase’s difficulties?
While recent events are a stark reminder of how anything can happen, it is worth noting that Coinbase’s business model is different from FTX’s.
Firstly, the company does not have a token like FTX with which to value part of its balance sheet, which partly avoids distorting the balance.
Secondly, the company has also issued a statement saying that it cannot fall victim to a similar crisis. In the arguments put forward, Coinbase argues that its situation as a listed company leads it to an obligation of transparency:
Second, as a publicly traded company in the United States, we have also built our business in a way that allows us to be transparent about our track record, the strength of our balance sheet, and to effectively and prudently manage risk for our customers and ourselves. “
Of course, as healthy as any player in the ecosystem may be, it’s worth remembering the risks involved in entrusting your money to a company. Cryptocurrencies offer a unique opportunity to actually own your investments, and it is then important to educate yourself on self-guarding to protect yourself from third-party failures.
