Will Coinbase go Bankrupt?

The devil is in the sentiment.

Hey Everyone,

Since the downfall of SBF and FTX, and likely Genesis, we have to consider the real stress Coinbase might be under COIN 0.00%↑

Mentioning this even a few weeks ago would have sounded crazy! Not so crazy anymore!

Incredible how silent the crypto media gets when crypto tokens are in the dog house. That’s proof of a corrupt media industry.

Coinbase Debt Was ‘Canary in the Coal Mine’ for Crypto Meltdown

There’s a new worry about Coinbase bonds to factor in.

If we are to believe some of the latest reports, Coinbase, the second largest cryptocurrency exchange by trading volume, is really feeling the pressure following the collapse of rival exchange FTX.

If Coinbase went under, that would indeed be a crypto apocalypse and not just a new normal of the crypto winter. This is because Coinbase is an ambassador on the public markets of this new shiny alternative asset class. The future of tokens, stable coins and trust in centralized exchanges depends on the success of firms like Coinbase, basically the Paypal (including high fees), of crypto.

The largest US digital-asset trading platform has seen the price of its bonds plunge this year. In early January, the price for one of its most active notes was at about 92 cents. It then slid to about 77 cents in April before dropping to 63 cents amid the Terra Luna market crash in May. The bonds traded around 53 cents on the dollar -- a level typically associated with distressed -- in early morning trading in New York Wednesday, according to Trace bond trading data.

If the crypto contagion narrative is true, only Binance might survive for sure. Fundamentally is already coping with major losses and was forced to cut its workforce by 18 percent this summer. It’s runway assumes the crypto winter lasts only along the lines of historical trends, but previous crypto winters didn’t necessarily coincide with economic downturns, inflation and crypto contagion of this magnitude.

The crypto exchange’s debt can be described as a “canary in the coal mine,” Bloomberg Intelligence credit analyst David Havens said in a phone interview. This analogy is getting a lot of media attention. For Coinbase to be at serious risks, more contagion would have to occur and Bitcoin would need to drop significantly lower.

Mizuho analysts wrote in a note on Friday that daily volumes in the industry are trending 30% to 40% below the average for the year. Coinbase is a poster child of mainstream adoption of crypto, if it were to fall I’m not sure what or how the crypto token industry would respond or demand for these “altcoins” to Bitcoin.

Fundamentally, Coinbase suffers from a two-pronged headwind. After soaring to a record revenue tally of $7.84 billion in 2021, the company encountered a radical paradigm shift this year.

This pandemic stimulus is haunting less traditional business models. The false hype of the stock bubble is also causing a bad case of whiplash for the crypto sector, like the NFT trend dying in mid flight. Crypto volatility remains a huge obstacle for supply-demand swings in a bipolar adoption of tokens, stable coins and these so-called digital assets. That tokens are useless, not used for payments and typically even more volatile than Bitcoin is highly problematic.

Coinbase’s entire business model may hinge on a ruse.

The news also comes after now bankrupt rival exchange FTX imploded in spectacular fashion, wiping out a $32 billion valuation in a matter of days. We should not assume that COIN 0.00%↑ is also immune from such things.

Earnings data is the bar and the data isn’t good. Strikingly, the company posted revenue of $590 million in the third quarter, down 55% against the year-ago period. As well, Coinbase posted a net loss of $545 million, a picture of extreme contrasts against net income of $406 million in Q3 2021.