Crypto Analytics

Coinbase boss says ‘no risk of bankruptcy’ after regulatory filing raises alarm

Cryptocurrency exchange Coinbase’s shares shed almost a quarter of their value on Wednesday after it released dismal results, while its chief executive rushed to allay what he said were unnecessary bankruptcy fears.

Coinbase shares fell 23 percent after reporting a sharp drop in its earnings that missed analysts’ expectations and a sharp drop in trading volume in its first-quarter results on Tuesday.

The poor results, coupled with concerns about a regulatory submission filed later that day, prompted Chief Executive Officer Brian Armstrong to do so state on twitter that Coinbase has “no risk of bankruptcy”.

His comment came after a new disclosure suggested customers could make claims against the exchange, sparking alarm among the exchange’s users.

According to the filing, the crypto that Coinbase holds for users could “be the subject of bankruptcy proceedings and such customers treated as our general unsecured creditors.” As a result, users may find the platform “riskier and less appealing,” potentially affecting their financial health, the filing said.

However, Armstrong rushed to reassure users and apologized for not communicating “proactively” when the new wording was added.

“There’s some noise about a disclosure we made in our 10Q [regulatory filing] today about how we hold crypto assets,” Armstrong tweeted, adding that the exchange changed its terms to meet a regulatory requirement rather than risk going bust.

Analysts at Wedbush noted that Coinbase was “filled with cash” and was still investing “aggressively” during the downturn.

In its first-quarter results, the company reported larger losses than Wall Street was expecting — $430 million compared to the $47 million estimated by analysts — and forecast trading volume and user counts to continue in the current quarter would sink.

Coinbase shares are down 67 percent of their value year-to-date, falling below $100 for the first time since the company went public in April last year. At the time of the IPO, Coinbase shares were worth $381.

The health of Coinbase’s business has long tracked trends in the broader crypto markets, benefiting from a boom in speculative trading by retail investors in the first half of last year. After its public debut, the company’s gains during the 2021 bull market outperformed more established exchange operators, including CME Group and Intercontinental Exchange.

However, recent rate hikes have prompted investors to flee the riskiest corners of global financial markets, resulting in a crypto bear market that has been dubbed the recent “crypto winter.”

Bitcoin has fallen sharply lately, falling below $30,000 for the first time since July earlier this week amid broader turmoil in cryptocurrency markets caused by the collapse of stablecoin Terra.

Coinbase is also facing regulatory hurdles. Speaking to analysts on Tuesday, Armstrong said the company suspended its services in India just days after the launch due to “informal pressure” from the Reserve Bank of India. Armstrong has previously had clashes with US regulators currently circling the industry.

Last year, he accused the US Securities and Exchange Commission of “incomplete conduct” after it threatened to sue the company if it launched a particular lending product. Coinbase later shelved plans for the Lend product.

Despite the defeat, Armstrong and other executives repeatedly tried to reassure investors that the downturn could be an opportunity for the company to focus on diversifying its business, investing in product innovation and hiring talent. The company recently launched a non-fungible token marketplace and has explored areas like crypto derivatives.

Coinbase signed its shareholder letter with #wagmi, a hashtag for “we will all make it” popular in the crypto community.


Source: Crypto News Austria

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