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Coinbase: Is the Bitcoin exchange headed for a liquidity crisis?

 

Coinbase caused quite a stir with its IPO last year. But the bear market threw a spanner in the works for the largest Bitcoin exchange in the USA. The result was radical staff cuts, and around 18% of the workforce was laid off in a very short time. Even candidates who were practically on the verge of receiving an employment contract were dismissed without further ado.


With the merger of Coinbase and Coinbase Pro, additional costs were very likely also eliminated. After all, you only operate one stock exchange and no longer two. In addition, a strict separation no longer seems to be up-to-date, because even small investors appreciate professional trading tools and user interfaces.


Now bad rumors are added, because Coinbase is said to have stamped out affiliate marketing in the USA. Therefore, influencers and media in the USA should no longer receive payments if they recruit new customers. In fact, as early as June, a Business Insider report revealed that commissions had been significantly reduced. Now the program will probably be completely discontinued on July 19th.


Is Coinbase bankrupt?

The rumor quickly spread on social media that Coinbase was suffering from liquidity bottlenecks. In view of the lending crisis and the resulting bankruptcy proceedings of Celsius and Voyager, such rumors have great appeal and are linked to fears that are not entirely unfounded.


However, Coinbase is a public company and not a CeFi lender whose business practices are opaque. The exact opposite is the case and accordingly you can see for yourself how the company is doing.


A bankruptcy or a liquidity bottleneck would therefore be a big surprise, because neither would go unnoticed by the public. The cessation of the affiliate program does not herald an impending bankruptcy, but rather the expectations of one's own business. Apparently they no longer expect additional growth during the bear market or they are simply dissatisfied with the quality of the customers they have recruited. That should be the case if you pay more for new customers than they actually bring in additional income. Basically, Coinbase, like all other Bitcoin exchanges, is financed by fees on its customers’ trading.


If the interest decreases, then the income automatically decreases radically. Coinbase is therefore likely to face tough times if the crypto market continues to shrink. But a bankruptcy like the one experienced at Celsius is very far-fetched. If you want to be absolutely sure, you keep your cryptos on your own wallet anyway and not on an exchange.

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