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They just posted a quarterly loss of $430 million.

maxerickson 4y ago
Okay, but that isn't a liability in an accounting sense, it is a cash flow. Edit: looking at the 10K, other than customer assets (where they have a net holding), they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations). So if they shut it all down, there would be funds left over.
- WJW 4y ago
  Would that be 5 billion in customer assets and associated liabilities, leaving about 1 billion of equity for Coinbase? At a burn rate of 430 million per quarter that only leaves a runway about 7-8 months.
  - maxerickson 4y ago
    No, I left custodial holdings out of those numbers. The dead reply to my comment at the top of the thread makes a good point that loss of the custodial holdings in a hack would bankrupt them.
    - AdamN 4y ago
      Wouldn't a hack of the custodial holdings just mean their customers lose their money but the business is otherwise a going concern (for that few moments until everybody stops paying them)?
      - lazide 4y ago
        They get a lot/most of their money from fees with ongoing transactions. If you look at the ‘5 minutes ahead’ picture if there is a hack that either 1) steals all customer assets, or 2) requires them to freeze all activity for a serious length of time, it’s a ‘no longer going concern’ type situation. No transactions? No income. No trust/willingness for people to continue doing transactions? No future income.
        tekknik 4y ago
        According to Coinbase 98% of their crypto is stored in offline wallets. So hacking won’t work. You’ll have to break into wherever they have the coins stored and hope the key isn’t destroyed when you unplug the device.
- JumpCrisscross 4y ago
  > they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations...if they shut it all down, there would be funds left over Every company that ever went bankrupt had more assets than obligations before they went bankrupt. Coinbase's quick ratio [1] adjusted for custodial assets, as of 31 March 2022, was 6.6 [2][a]. That's good. Don't adjust for custodial funds, and it's 0.15. Virtually bankrupt. With $6.2bn cash on the balance sheet and $830mm cash burned by operations in Q1, they have over 2 years of runway assuming Q1's terribleness continues. That's good. But were they to suffer a hack, that margin of safety could rapidly collapse. And in that case, customers could be left behind secured lenders. (Where USDC holders would wind up is a mystery.) [1] https://www.investopedia.com/terms/q/quickratio.asp https://www.investopedia.com/terms/q/quickratio.asp [2] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d81-41a2-4a3c-86fb-b4067ab1016c.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8... page 5 [a] (6,116,388, cash and cash equivalents + 346,048, accounts receivable + 1,333,333, crypto assets held) / (10,921,823, current liabilities - 9,742,961, custodial funds due to customers)
  - maxerickson 4y ago
    Right, I compared cash to liabilities, not assets.
  - ragnot 4y ago
    Could you explain how you got 0.15? (6,116,388, cash and cash equivalents + 346,048, accounts receivable + 1,333,333, crypto assets held) / (10,921,823, current liabilities) = 0.71
  - ricardobayes 4y ago
    What this means in layman's terms if they don't dip into custodial funds they can't cover their current liabilities?
- formerkrogemp 4y ago
  On paper, you have and can report a lot of assets. However, many companies go bankrupt with current ratios greater than one with either overinflated or overvalued assets or undervalued or understated debts or some combination. Financial reports a la 10-Ks and 10-Qs are 'boring,' difficult for most people to read, contain specialized jargon, and contain significant lag time where a going concern is, well, a concern. Audits are almost always annual and not quarterly. Disclosures may be required, but they can be broad or nonspecific enough as to delay broader acknowledgement of bankruptcy level problems. I'd take information from financial reports with a bit of salt, even if they are often our best, or only, source of information.
  - maxerickson 4y ago
    If "cash and cash equivalents" is wrong, that's fraud, not something I should have taken with a grain of salt.
    - formerkrogemp 4y ago
      Cash and cash equivalents can be very wrong, even when audited by firms such as Ernst and Young, one of the big four accounting firms. Wirecard is a good example. https://www.ft.com/content/bcadbdcb-5cd7-487e-afdd-1e926831e9b7 https://www.ft.com/content/bcadbdcb-5cd7-487e-afdd-1e926831e... Grant Thornton audits Coinbase last I checked. Hopefully they do a better job than EY. I doubt a "stablecoin" holding would count as cash equivalents, but not all cash equivalents are equal and the definition has changed over the years. Commercial paper, 1-3 month maturing Treasury notes, certificates of deposit, money market accounts, and savings account funds can all be counted as cash equivalents. For example, if you hold a two month commercial paper of another cryptocurrency company as Coinbase, this might qualify as a cash equivalent. Cash equivalents are not all equally liquid or risky. Even if all of the cash and cash equivalents are there and solvent, the definition of a cryptocurrency in a bankruptcy might not be settled in a court of law in such a way that it favors account holders of Coinbase held cryptocurrency over stockholders or bondholders.
      - maxerickson 4y ago
- randomsearch 4y ago
  There are 14 billion tether in circulation, don’t they need enough to back it?

Okay, but that isn't a liability in an accounting sense, it is a cash flow. Edit: looking at the 10K, other than customer assets (where they have a net holding), they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations). So if they shut it all down, there would be funds left over.

WJW 4y ago
Would that be 5 billion in customer assets and associated liabilities, leaving about 1 billion of equity for Coinbase? At a burn rate of 430 million per quarter that only leaves a runway about 7-8 months.
- maxerickson 4y ago
  No, I left custodial holdings out of those numbers. The dead reply to my comment at the top of the thread makes a good point that loss of the custodial holdings in a hack would bankrupt them.
  - AdamN 4y ago
    Wouldn't a hack of the custodial holdings just mean their customers lose their money but the business is otherwise a going concern (for that few moments until everybody stops paying them)?
    - lazide 4y ago
      They get a lot/most of their money from fees with ongoing transactions. If you look at the ‘5 minutes ahead’ picture if there is a hack that either 1) steals all customer assets, or 2) requires them to freeze all activity for a serious length of time, it’s a ‘no longer going concern’ type situation. No transactions? No income. No trust/willingness for people to continue doing transactions? No future income.
      - tekknik 4y ago
        According to Coinbase 98% of their crypto is stored in offline wallets. So hacking won’t work. You’ll have to break into wherever they have the coins stored and hope the key isn’t destroyed when you unplug the device.
JumpCrisscross 4y ago
> they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations...if they shut it all down, there would be funds left over Every company that ever went bankrupt had more assets than obligations before they went bankrupt. Coinbase's quick ratio [1] adjusted for custodial assets, as of 31 March 2022, was 6.6 [2][a]. That's good. Don't adjust for custodial funds, and it's 0.15. Virtually bankrupt. With $6.2bn cash on the balance sheet and $830mm cash burned by operations in Q1, they have over 2 years of runway assuming Q1's terribleness continues. That's good. But were they to suffer a hack, that margin of safety could rapidly collapse. And in that case, customers could be left behind secured lenders. (Where USDC holders would wind up is a mystery.) [1] https://www.investopedia.com/terms/q/quickratio.asp https://www.investopedia.com/terms/q/quickratio.asp [2] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d81-41a2-4a3c-86fb-b4067ab1016c.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8... page 5 [a] (6,116,388, cash and cash equivalents + 346,048, accounts receivable + 1,333,333, crypto assets held) / (10,921,823, current liabilities - 9,742,961, custodial funds due to customers)
- maxerickson 4y ago
  Right, I compared cash to liabilities, not assets.
- ragnot 4y ago
  Could you explain how you got 0.15? (6,116,388, cash and cash equivalents + 346,048, accounts receivable + 1,333,333, crypto assets held) / (10,921,823, current liabilities) = 0.71
- ricardobayes 4y ago
  What this means in layman's terms if they don't dip into custodial funds they can't cover their current liabilities?
formerkrogemp 4y ago
On paper, you have and can report a lot of assets. However, many companies go bankrupt with current ratios greater than one with either overinflated or overvalued assets or undervalued or understated debts or some combination. Financial reports a la 10-Ks and 10-Qs are 'boring,' difficult for most people to read, contain specialized jargon, and contain significant lag time where a going concern is, well, a concern. Audits are almost always annual and not quarterly. Disclosures may be required, but they can be broad or nonspecific enough as to delay broader acknowledgement of bankruptcy level problems. I'd take information from financial reports with a bit of salt, even if they are often our best, or only, source of information.
- maxerickson 4y ago
  If "cash and cash equivalents" is wrong, that's fraud, not something I should have taken with a grain of salt.
  - formerkrogemp 4y ago
    Cash and cash equivalents can be very wrong, even when audited by firms such as Ernst and Young, one of the big four accounting firms. Wirecard is a good example. https://www.ft.com/content/bcadbdcb-5cd7-487e-afdd-1e926831e9b7 https://www.ft.com/content/bcadbdcb-5cd7-487e-afdd-1e926831e... Grant Thornton audits Coinbase last I checked. Hopefully they do a better job than EY. I doubt a "stablecoin" holding would count as cash equivalents, but not all cash equivalents are equal and the definition has changed over the years. Commercial paper, 1-3 month maturing Treasury notes, certificates of deposit, money market accounts, and savings account funds can all be counted as cash equivalents. For example, if you hold a two month commercial paper of another cryptocurrency company as Coinbase, this might qualify as a cash equivalent. Cash equivalents are not all equally liquid or risky. Even if all of the cash and cash equivalents are there and solvent, the definition of a cryptocurrency in a bankruptcy might not be settled in a court of law in such a way that it favors account holders of Coinbase held cryptocurrency over stockholders or bondholders.
    - maxerickson 4y ago
randomsearch 4y ago
There are 14 billion tether in circulation, don’t they need enough to back it?