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Coinbase makes money on fees and doesn’t lend out deposits. Seriously look at their balance sheet! They have zero risk of this kind of insolvency, their only
by RC_ITR 4y ago
Coinbase makes money on fees and doesn’t lend out deposits.
Seriously look at their balance sheet!
They have zero risk of this kind of insolvency, their only risk is people stop using them to trade.
Say what you will about that being a weird/dumb model but here we are.
- gonzo41 4y agoThey are facing a systemic risk of crypto having such bad PR that no one will be willing to go near them.
- stephen_g 4y agoIn theory they make money on fees... They posted a net loss of $544.6M on a 64% decline in transaction revenue in the quarter ended Sep 30 [1]. This next big drop probably doesn't bode very well for them... Coinbase may eventually run out of money and go out of business because their operating costs presumably exceed their revenue, but the customer funds won't evaporate if/when they do, unlike the shadier exchanges. 1. https://www.reuters.com/technology/coinbase-reports-third-quarter-loss-volumes-drop-2022-11-03/ https://www.reuters.com/technology/coinbase-reports-third-qu...
- colinmhayes 4y agoCoin base doesn’t offer margin loans?
- RC_ITR 4y agoThey stopped in 2020. Like I said, the model is sort of stupid and weird but it’s less stupid than FTX’s at the moment!
- colinmhayes 4y agoI mean really it seems like FTX’s issue is that it got raided to serve as a hedge funds piggy bank. They’re not stupid, they wouldn’t accept such a massive amount of collateral in their own token if it wasn’t mostly owned by their hedge fund that they want to funnel assets too.
- Thorrez 4y agoAnother risk is if they get hacked.
- graeme 4y ago> They have zero risk of this kind of insolvency, their only risk is people stop using them to trade. US regulated companies can, in fact, go bankrupt, and frequently do. They can also misuse funds or make foolish decisions that cause them to to under even if customers keep using them. There is even have a system for scoring this risk, called the Altman Z score. A good score is above 3. A grey zone score is 1.8-3.0. Coinbase’s current score is 0.15! In the distressed zone with serious possibility of bankruptcy within the next two years. https://www.gurufocus.com/term/zscore/COIN/Altman-Z-Score/COIN https://www.gurufocus.com/term/zscore/COIN/Altman-Z-Score/CO... Anyone who disagrees with this solvency risk assessment is free to purchase some of their outstanding bonds. Their bond coming due in 2028 goes for 53 cents on the dollar. If they don’t go bankrupt, you’ll double your money in five years. A yield of 13.3% per year! https://markets.businessinsider.com/bonds/coinbase_global_incdl-notes_202121-31_regs-bond-2031-usu19328ab62?op=1 https://markets.businessinsider.com/bonds/coinbase_global_in...
- wmf 4y agoThe point is that if Coinbase goes bankrupt their customers will not lose any money because customer assets are segregated from Coinbase's assets.
- iseeyou 4y agoBecause custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors https://finance.yahoo.com/news/coinbase-warns-customers-could-lose-103534095.html https://finance.yahoo.com/news/coinbase-warns-customers-coul...
- RC_ITR 4y ago>may There’s no precedent. Disclosures are always worst case scenarios And again, will anyone please read their fucking balance sheet? Liabilities of $105bn, $101bn which are deposit liabilities vs. $101bn of customer assets. Even in a worst case scenario depositors get a <4% haircut. THIS IS VERY DIFFERENT FROM WHAT FTX DID