Coinbase has been under criticism for a long time. It basically got under fire for being on the verge of bankruptcy and having a bad corporate strategy. As a result, the share price has fallen significantly and major shareholders such as Cathie Wood have exited. This raises the question of whether the stock exchange still makes sense as an investment provider in the future and whether the share price offers an opportunity. Is Coinbase risky? Let’s find out.
Is Coinbase Risky? The Events of the last few weeks
In the last few weeks, the events surrounding the company Coinbase have increased. We show you the events:
Coinbase accused of bankruptcy
A week ago, more and more rumors surfaced that Coinbase was facing bankruptcy. The reason for this was a report by Business Insider with leaked emails from Coinbase. These state that the company would soon be discontinuing the affiliate program. It also included advertising deals with various influencers and the press. Some influencers spread the news further, including Ben Armstrong:
Coinbase responded to the rumors in a statement. It denies any connection to the bankruptcies of Three Arrows Capital, Voyager and Celsius. These insolvencies were quite foreseeable and started with Terra (LUNA) and UST. In addition, it was made clear that it would not participate in fundamentally risky credit transactions. That is why Coinbase sees the wave of bankruptcies in the crypto industry as a typical event for the credit industry. The company also guarantees 1:1 custody of all customer funds and has more than $6 billion in capital reserves.
Mood in the company at a low point
Not only is the allegedly difficult financial situation troubling Coinbase, but employee satisfaction has also fallen. In mid-June, for example, employees published a petition targeting the three managing directors. The petition calls to fire each of COO Emilie Choi, Chief Product Officer Surojit Chatterjee and Chief People Officer LJ Brock from the largest cryptocurrency exchange in the US in a vote of no confidence. It has already been deleted but is stored on the Wayback Machine Internet Archive page. The petition lists eight reasons for the no-confidence vote. The leaders have been accused of “the failure of the Coinbase NFT platform”, “aggressive hiring for thousands of roles despite the lack of a sustainable plan” and a “toxic workplace culture”.
SEC investigates Coinbase
The Securities and Exchange Commission (SEC) has also targeted the US crypto exchange. Coinbase is accused of selling unregistered securities to American citizens. The head of the legal department, Paul Grewal, vehemently denied the allegations on Twitter:
“I’m pleased to say it again: we are confident that our rigorous due diligence process – a process that the SEC has already reviewed – keeps securities off our platform, and we look forward to working with the SEC on this matter.” .” It therefore remains to be seen how the litigation between Coinbase and the SEC will proceed and whether it will take on similar proportions to Ripple’s.
Big investors are getting out
The allegations and events also trigger uncertainties among large investors. Cathie Wood, the third largest shareholder, sold more than 1.4 million Coinbase shares at a huge loss. Investment bank Goldman Sachs takes a similar view and downgraded the stock from “neutral” to “sell”. The target price was lowered from $70 to $45.
Are my coins still safe with Coinbase?
Although the situation may seem scary, Coinbase’s insolvency is very unlikely. The exchange, which was founded in 2011, is one of the oldest in the entire market. Coinbase has been through similar situations and bear markets unscathed. Despite all this, the risk of bankruptcy is never zero. Therefore, once you have a certain asset, you should always ask yourself whether you want to leave the coins in an exchange. Because if insolvency does occur, customer funds are usually lost 100%. For these reasons, it is often advisable to purchase a hardware wallet. With this, you can keep your coins private and are protected from imminent insolvencies.
Is Coinbase Stock Worth an Investment?
The Coinbase share also suffered massively from the events. Since the IPO on April 16, 2021, the price has risen to over 400 US dollars until it slipped to 62 US dollars in the current crash. Sales and profits fell due to the ongoing bear market and lower trading volume, but Coinbase can also score with its NFT marketplace and the Coinbase venture depot in addition to its crypto exchange. However, Coinbase is heavily dependent on crypto prices, which is why the risk of an investment is very high. However, if you believe in an upcoming bull market and the crypto sector, buying the stock is definitely worth considering.
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