Could Coinbase encounter the same difficulties as FTX?

After the events of FTX, we might wonder if other platforms like Coinbase, struggling during this bear market, could follow the same path. Let’s analyze the elements at our disposal to try to assess the risk.

Coinbase facing the difficulties of the bear market

While the FTX case shows that even the biggest platforms are not immune to major difficulties, it’s legitimate to wonder who else this could happen to. In these reflections, we can for example wonder about Coinbase, which has experienced some difficulties since its IPO.

Indeed, while the action had been introduced at 429.54 dollars on April 14, 2021, it now trades at $50.83. Even the rebound attempt initiated this summer was aborted, and the share price has since been more than halved:

Coinbase share price

The company’s quarterly balance sheet figures are hardly more engaging with $572 million in net revenue in total, compared to 1.235 billion in the third quarter of 2021. If we compare this same value to the first and second quarters of this year, these revenues amounted to 1.165 billion and 803 million dollars respectively.

The number of average monthly active users is also downfrom 8 million to 9.2 million compared to the previous quarter.

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The warning of the German financial policeman

Beyond its financial results, it would seem that Coinbase also encounters difficulties with the German financial authority (BaFin).

The company indeed has a regulated entity in the country and the BaFin has issued an order, asking Coinbase to review its organization in order to deal with certain regulatory breaches:

“An audit of the annual accounts revealed organizational deficiencies in the company. The regularity of the company’s organization has not been demonstrated in all areas audited. »

While BaFin does not provide concrete details on the deficiencies in question, an exchange spokesperson assured our colleagues at CoinDesk that Coinbase was fully cooperating with the authorities in order to resolve this situation.

Should we be worried about the difficulties of Coinbase?

While the latest events are a stark reminder of just how much can happen, it is nonetheless worth emphasizing that Coinbase’s business model is different from FTX’s.

First, the company does not have tokens like the FTT with which to value part of its balance sheet, which partly avoids distorting the balance.

In addition, the company also issued a press release in which she affirms that she cannot be the victim of a similar crisis. In the arguments put forward, Coinbase notably 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 for ourselves. »

Of course, as healthy as any player in the ecosystem might be, remember the risks of entrusting your money to a company. Cryptocurrencies offer a unique opportunity to really own your investments, and it is therefore important to train in self-guarding to protect yourself from third-party bankruptcies.

👉 Also in the news – Before signing a takeover deal with competitor Binance, FTX appealed to Wall Street

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Sources: Coinbase, BaFin, TradingView

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