Coinbase, one of the largest exchanges in the cryptocurrency sector, is now an institution in terms of size and reliability, at least on paper, but that is not enough to stop the scrutiny sparked by balance sheet fears following the FTX and Alameda Research case.
Shareholders and investors are not shying away from putting anyone under the magnifying glass when it comes to business, and Coinbase is also under scrutiny especially from institutional investors.
To calm things down, CEO Brian Armstrong wanted to personally intervene with some statements emphasizing the quality of Coinbase’s fundamentals.
Coinbase is publicly traded and because of this is subject to a whole series of very stringent controls by Wall Street, regulators, and the state.
The corporate composition and the controls implemented put FTX and Coinbase on two totally different and not comparable planes.
Both in terms of balance sheets and the laws to which the two companies must adhere there are macroscopic differences.
FTX is a Bahamas-based company with facilitated regulations and minimal controls despite boasting certificates that were actually discovered to be false.
By contrast, Coinbase is headquartered in the United States of America far more navigated in the crypto world and much stricter in controls from an investment protection perspective.
Moreover, the world’s second-largest exchange company after Binance is publicly traded and in addition to regular controls, there are others that are periodic in nature.
On these matters Brian Armstrong remarked:
“Coinbase is not in trouble. We are very well capitalized – we have $5 billion of cash on our balance sheet and we hold those assets in dollars, so we are not exposed to crypto volatility. Client funds are segregated, this is an important thing to consider.”
Despite the macroeconomic situation, the bear market, and market scandals, cryptocurrency companies are recovering from a significant decline due to the various Luna, FTX, Three Arrow Capital, etc. that have stirred the pot quite a bit.
On the subject of Three Arrows Capital, it should be noted that the stability of some companies has come through not only improved collateral but also internal reorganizations that have seen copious layoffs as also happened to Celsius Network, Voyager Digital and Coinbase itself.
“I think we have also been very clear to the public that Coinbase is a very different company than FTX. We are registered right here in the US. We are not in an offshore jurisdiction that has minimal controls. Coinbase is best in class as a public company: we just met a completely different standard than what others have been able to do.”
Coinbase did not have significant exposure on FTX and Alameda Research both of which are traceable to SBF and reminded investors of this with thoughtfulness to check audited financial statements that are managed by Deloitte management and consulting.
Coinbase’s stock hit an all-time low Monday after a very challenging week the price dropped about 8% going below $42.
The shares have suffered from market turmoil precisely because centralized exchanges like Coinbase are affected by issues like what happened to FTX.
Binance’s BNB for example fell 4.13% according to TradingView and Gemini’s (GUSD) fell 1.86%.
Bitcoin also took the hit and returned below $16,000, dropping 1.78% and Ethereum as much as 3.25%.
In Q3, Coinbase recorded less spending than expected stopping at $1.1 billion while in the previous quarter the figure was $1.8 billion.
Trading volumes declined while subscription and service revenues held up.
As of 30 September, Coinbase custody found that there were 635,235 Bitcoin in each Grayscale product for a total of $10,220,744,223 while Ethereum’s share was 3,056,833 for a total of $3,435,178,073 US dollars.
The news was picked up on Twitter by Blockworks and immediately shared by other news outlets.
Source: https://en.cryptonomist.ch/2022/11/22/point-about-coinbase/