Coinbase Says It Has No Financial Exposure To Bankrupt Crypto Firms

July 22, 2022 11:26 am Comments

Coinbase publicly stated last Wednesday that it had no exposure to the recent crypto firms that have recently filed for bankruptcy which includes Three Arrows Capital, Voyager Digital or Celsius Network.

The collapse of these three companies likely gave more fuel to the current crypto bear market and sparked a lot of investor panic.

With that being said, this is typical in bear markets and can be seen as a healthy correction that will benefit the crypto firms that do truly provide value.

Coinbase is claiming that it had no financial exposure to any of these three firms and remains financially sound although the company did recently do a layoff for a significant percentage of its employees.

Yahoo reports:

In a blog published Wednesday morning, the publicly-traded crypto exchange’s heads of Institutional Trading, Credit and Market Risk stated that the company had “no financing exposure” to bankrupt firms Three Arrows Capital, Voyager Digital or Celsius Network.

In a footnote, Coinbase did disclose “non-material investments in Terraform Labs,” the technology developer firm behind the more than $50 billion Terra ecosystem which collapsed in May after its stablecoin TerraUSD faced a bank run.

A Coinbase spokesperson told Yahoo Finance in an email Wednesday morning: “Coinbase Ventures has invested in over 300 projects to date, including a broad range of defi projects. We made a small minority investment in Terraform Labs in 2020 and have not been actively involved in the operations of the company.”

According to data from Crunchbase, Coinbase Ventures was involved in a $25 million funding round for Terraform Labs back in January 2021, which was led by Galaxy Digital.

Although Coinbase is more financially sound than many other crypto businesses, it is still recommended to at least have some digital assets in a private wallet instead just to be safe.

Coinbase commented on the bankruptcies as well and stated that this was a major inflection point for the crypto industry.

It indicates which firms have no risk controls and which do which separates the winners from the losers.

Additionally, it also exposed system deficiencies which the industry had to learn from eventually which is similar to all other financial markets as well.

Yahoo concludes:

“Unhedged bets, huge investments in the Terra ecosystem, and massive leverage provided to and deployed by 3AC meant that risk was too high and too concentrated,” the company wrote.

“Ultimately, it may still take time for the broader industry to learn the right lessons from the systemic deficiencies we have seen.”

Shares of Coinbase were up as much as 7% early Wednesday, adding to recent gains that have seen the stock rise more than 30% this month.

Year-to-date, however, shares remain down more than 65%.
The rally in Coinbase also comes amid a broader turnaround in the crypto space, with bitcoin (BTC-USD) trading above $24,000 early Wednesday for the first time since mid-June.

Coinbase is set to report its latest quarterly earnings on August 9 after the market close.

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