Rumors of Coinbase having a liquidity crunch have been refuted by the community as cash outflows fluctuate in a jittery crypto market.
Rumors surfaced late Friday that Coinbase may be facing cash flow issues following leaked emails indicating it would be suspending its affiliate program. Business Insider reported that they received emails stating:
“This was not an easy decision, and was not taken lightly, but, due to crypto market conditions and the outlook for the remainder of 2022, Coinbase is unable to continue to support incentivizing traffic on its platform.”
Some took to Twitter to assert that this decision was indicative of liquidity problems for the first American scholarship. CoinGeek’s Kurt Wuckert Jr tweeted that the suspension of the affiliate program, in combination with other decisions made by Coinbase over the past few weeks, means that a “liquidity crisis” is imminent.
In the last month, Coinbase combined their USD and USDC markets, closed Coinbase Pro and turned off their affiliate program.
This is after over a year of insiders selling $COIN stock which has absolutely cratered.
I smell a liquidity crisis.
— Kurt Wuckert Jr | GorillaPool.com 🍌🍌 (@kurtwuckertjr) July 16, 2022
Coinbase cash outflows
On July 15, around 50% of stablecoins on Coinbase Pro left the exchange, according to on-chain data from CryptoQuant; the total value was approximately $248 million. The stablecoin exit percentage was significantly higher on Coinbase than on other exchanges such as Binance. Only about 1% of stablecoin reserves left Binance during the same period, but the tokens had a similar value at just under $300 million.
When comparing the value of stablecoins on the two exchanges, the reduction in stablecoins held on Coinbase contrasts with Binance. Stablecoins peaked at around $1.2 billion on Coinbase in January 2022, but today their value stands at just $284 million. On Binance, the value has remained in an upward trend since 2019.
The data paints a less drastic but still worrying picture when comparing bitcoins held on each exchange. Coinbase has seen a steady decline in bitcoins in its reserves, while Binance has been rising over the same period.
When all exchanges tracked by CryptoQuant are included, the Coinbase chart appears to follow the general industry trend. The downward trend in bitcoin held on Coinbase may simply follow the cryptocurrency’s increased popularity in unguarded (non-hosted) wallets.
The community defends Coinbase
Amid rumors of a crisis at Coinbase, several industry professionals have called out those who suggest the exchange is in trouble. Dan Held of Kraken tweeted: “Coinbase does not have a liquidity crisis“, while the responsible developer of the Coinbase affiliate program, NJ Skobene, confirmed that the removal of the program was not a red flag.
No, Coinbase doesn’t have a “liquidity crisis” bc they shut down their affiliate program 🙄
— Dan Held (@danheld) July 16, 2022
Jungle Inc, a YouTuber specializing in cryptocurrencies, also tweeted that Coinbase has “$6 billion in cash” and appreciable cryptocurrency reserves. However, his confidence started and ended in the same post, as he confirmed that he withdrew all funds from the exchange. The risk of holding on exchanges may seem heightened after Voyager and Celsius both went bankrupt this year.
Coinbase has 6 billion in cash + large crypto reserves. They will be fine!
With that being said I just transferred everything off. 🍾🍾🍾
— Jungle Inc 💥Steady Lads💥 #MMG (@jungleincxrp) July 16, 2022
On July 12, Coinbase co-founder Brian Armstrong tweeted that the company was “still adaptingto the growth it has achieved in 2021. Will this growth bring down one of the world’s most trusted exchanges? If so, it would undoubtedly have a ripple effect on the rest of the industry. Currently, Coinbase’s cost-cutting strategies don’t appear to be extreme, given the fall in bitcoin’s price since January.
Coinbase grew a ton in 2021 and we’re still adjusting to that growth. One of the crazy parts about our industry is that in any given year we might be growing 300-500% or -50%. It makes it incredibly challenging to plan and culturally to absorb so many people during up periods.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) July 12, 2022
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