In traditional finance, institutions are often deemed “too big to fail” and will avoid bankruptcy in certain ways. That doesn’t necessarily apply to crypto institutions, no matter how big they may be. Coinbase has been in hot water lately due to dropping revenue and dwindling stock prices, and users might not get their money back if things go awry.
Coinbase is a rocky boat
Most people who have heard of cryptocurrency in their life will also know the name Coinbase. It is one of the many global trading platforms where users can acquire crypto assets through popular and convenient payment methods. Moreover, the company supports dozens of cryptocurrencies and fiat currencies, making it a crucial industry gatekeeper. Coinbase has supported millions of users since its inception and generated billions in trading volume.
There was a substantial buzz in the crypto community when Coinbase decided to go public on the stock market. That sentiment was short-lived among investors, as the company’s stock has been on a rollercoaster ride ever since. That is in line with the cryptocurrency markets, which have seen various ups and downs. Even so, Coinbase shares recently suffered another 15% blow, confirming interest is waning.
Making matters worse is how the company is losing revenue. A projected $1.48 billion expected in the latest quarterly report was not met. Instead, the company generated $1.17 billion, leaving stockholders dissatisfied. Considering how the Coinbase stock lost over 70% of its value since March 2022, something needs to change. If not, the company may go bankrupt, which would trigger a cascading ripple effect throughout the crypto industry.
With fewer users, less revenue, a decrease in monthly retail transactions, and a collapsing stock price, Coinbase is in the hot seat. The company’s performance hasn’t been aided by the fluctuating crypto prices and Bitcoin dipping below $30,000 this week. Nevertheless, company officials are not too worried, even with a $430 million loss in Q1 2022. That said, bankruptcy remains a plausible outcome, and users would get the short end of the stick if it happened.
The Coinbase Bankruptcy Scenario
A lot has been said about this global leading crypto trading platform in recent weeks. The company added a risk disclosure in the latest earnings report, confirming how users would not have asset protection if Coinbase files for bankruptcy. Courts can treat customer assets as Coinbase’s assets. None of this should be surprising to exchange users, as the saying “not your keys, not your coins” has always applied.
It is the first time company officials use such strong language, though. Moreover, the disclosure confirms users would be the last in line to receive compensation should things go awry with the company. It is intriguing to see Coinbase use terms like “bankruptcy” in their earnings yet claiming they have no plans to go down that route in interviews.
The problem here is how Coinbase is a custodian to the tune of over $250 billion. Claiming back such vast amounts of money if bankruptcy occurs would be virtually impossible. Moreover, it makes one wonder how much of these “reserves” are still in the hands of the company, despite CEO Brian Armstrong confirming “funds are safe”.
It is good to be prepared for all scenarios and be upfront with customers. Everyone now knows their funds should not be kept at Coinbase for too long, as the search for a proper crypto wallet needs to get underway.
Non-Custodial Wallets Are Essential
The best way for users to store their crypto assets is through a non-custodial wallet. More specifically, such a wallet enables the user to access the private key without sharing it with anyone else, i.e., an exchange like Coinbase. For newcomers, this may seem complicated, although solutions like Ambire make everything more accessible. Furthermore, there is no need for seed phrases, as one can access wallets through an email address and password combination.
Contrary to what one may think, the email and password combination does not require sacrificing its non-custodial approach. Ambire is an open-source project, and users can self-host their wallet, should they choose to do so. Additionally, all users who keep funds in an Ambire wallet will receive ongoing airdrops of $WALLET tokens. The $WALLET token is the governance token for deciding on Ambire development and integrations.
The Ambire wallet solution supports Ethereum, Polygon, BNB Chain, Avalanche, Fantom, and Arbitrum, which are prominent among cryptocurrency enthusiasts. Additionally, users can use it together with a hardware wallet – Trezor and Ledger – and use it to access dApps, decentralized finance, and blockchain gaming. Transaction fees can be paid in stablecoins rather than ETH or BNB, a welcome addition. With ongoing concerns over Coinbase filing for bankruptcy, it is a good time to look into non-custodial wallets. Ambire offers a solution and maintains a decentralized approach to its governance, making for an exciting combination.
