Coinbase reported a 27% drop in revenue in the first quarter due to declining platform usage.
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Coinbase stated that he does not have a counterparty associated with several failed cryptocurrency firms, seeking to allay concerns about the impact of the industry’s liquidity crisis on his business.
Coinbase “had no financial risk” for Celsius, Three Arrows Capital and Voyager Digital, the company said in a statement. Blog post Wednesday. Each firm filed for bankruptcy protection after the price of digital tokens fell, a cascade of liquidations of highly leveraged positions began.
The company’s shares rose 16% after the announcement.
“Many of these firms were overwhelmed with short-term liabilities that did not match longer-term illiquid assets,” the company said in a statement.
“We did not engage in such risky lending practices and instead focused on building our financial business with care and deliberate customer focus,” he added.
While Coinbase denies any credit risk to Celsius, 3AC and Voyager, it claims to have made an “intangible investment” in Terraform Labs, the Singaporean company behind failed stablecoin project Terrathrough his venture capital business.
The update is an attempt by Coinbase to reassure investors that it will not suffer the same fate as some of its peers. The company’s shares have fallen about 70% since the start of 2022 as interest rate hikes by the Federal Reserve shocked investors in both cryptocurrency and equities.
The cryptocurrency market has always been in turmoil after the death of Terra, a so-called “algorithmic” stablecoin that tried to maintain a $1 value with a code. This led to liquidity problems for Celsius and 3AC, two companies that were involved in leveraged cryptocurrency gambling.
As cryptocurrencies started to fall this year, investors wanted to withdraw their funds from firms like Celsius and 3AC. But the fall in the value of the assets owned by such companies meant they were unable to process those buyout requests. As a result, Celsius, Voyager and others put withdrawals on hold before eventually filing for bankruptcy protection.
bitcoin rose above the $24,000 mark on Wednesday for the first time in more than a month, along with wide recovery in crypto Prices. The world’s largest digital coin is still depreciating by about 50% since the beginning of the year.
Investors hope the Fed will less aggressive than feared with interest rates expected to rise next week.
Central banks have sought to tame runaway inflation with monetary tightening, but this has spooked equities and other risky assets, including cryptocurrencies, that have benefited from a flood of stimulus during the Covid-19 pandemic.