Following the Bitcoin highs last April and November, the cryptocurrency and other altcoins drastically fell in price. With the value of these assets falling, and rising interest rates making borrowing more expensive, several crypto firms including Celsius, Three Arrows Capital (3AC), Voyager, and others have run into serious financial difficulties and have restricted people’s ability to withdraw funds.
Even if you’re not involved in the crypto space, there’s a good chance you’ve heard of Coinbase – it’s one of the more popular places people can go to pick up some bitcoin, ether, or other asset. For people who do use this site, the company has put out a reassuring message explaining that it had no financial exposure to those firms that ran into trouble. It also said it’s not engaged in “risky lending practices”.
While Coinbase does offer financing, it uses various risk management programmes to ensure clients, shareholders, and the wider crypto space is protected. These defences include holding customer assets 1:1 to protect against default contagion and using an experienced risk team which perform due diligence, stress tests, and anticipates internal and external factors that could affect the company and mitigates against them.
In its post, Coinbase said:
"Notably, the issues here were foreseeable and actually credit specific, not crypto specific in nature. Many of these firms were overleveraged with short term liabilities mismatched against longer duration illiquid assets."
Hopefully, Coinbase’s measures will continue to pay off so that its customers continually have access to their assets. On the back of this news, Coinbase shares reached $77.67 from around $53 where they were a few days ago. The rebound in price of several cryptocurrencies also seems to have given the firm’s share price a boost, too.
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