The well-known US exchange Coinbase had problems with deposits and withdrawals yesterday.
Problems with Coinbase deposits and withdrawals resolved promptly
A notice had appeared on the site’s status page, now removed, announcing that deposits and withdrawals to and from US banks were not working.
We're currently experiencing technical issues creating ACH transfers. Rest assured, your funds are safe. Our team will provide an update here and on our Status Page when full functionality resumes: https://t.co/a3pl4WiDhZ
— Coinbase Support (@CoinbaseSupport) October 2, 2022
The problem was due to a technical glitch, and apparently related only to interactions with US banks, i.e., concerning withdrawals and deposits in US dollars.
Later in the day, after several hours, the problem was fixed.
We’ve fully resolved this issue and ACH transfers are now processing. We apologize for the inconvenience. https://t.co/dezVgcaagm
— Coinbase Support (@CoinbaseSupport) October 2, 2022
By the time the news began to circulate, which was long before the exchange publicly admitted the problem, Bitcoin’s price had experienced a small sudden drop from nearly $19,300 to just over $19,000 in less than an hour.
This sudden drop was probably due to the fear that the suspension of withdrawals was not due to a technical problem, but to an arbitrary decision by the company.
As soon as news began to circulate that it was a technical problem, the price of Bitcoin rose again to $19,250 within half an hour.
All this happened just hours before the company posted the official news on Twitter.
In other words, it is possible that Coinbase’s public communications came slightly later than the problem occurred. In those few hours, when there was still no official public communication about it, there was some fear in the crypto markets because some people feared that the problem could be more serious.
Indeed, it has happened before that exchanges, or other crypto services, were forced to suspend withdrawals due to lack of sufficient liquidity, and often in these cases the problem eventually turned out to be very serious.
In contrast, in yesterday’s specific case it does not appear to have been a liquidity problem at all. However, in those few hours when there were no official public announcements in the markets, fear mounted that it might indeed be a liquidity problem.
The exchange’s public reassurance that it was only a technical problem was enough to sweep away these fears within a few dozen minutes.
It is unclear what kind of glitch it was, but given that it was completely resolved within a little over six hours it may have been a relatively simple problem to fix.
Traditional finance fails where cryptocurrencies succeed
It is worth noting that the problem only affected deposits and withdrawals to and from US banks, and did not affect cryptocurrency withdrawals and deposits at all, regardless of where the funds were directed.
In other words, yesterday Coinbase did not actually suspend withdrawals, but for a few hours prevented dollar withdrawals directed to US bank accounts.
Perhaps this information was enough to understand that this was not an arbitrary decision, but probably a technical problem, not least because trading volumes in stablecoins usually are very high anyway.
However, from this point of view, Coinbase is a bit of an exception, because its top three trading pairs by volume are in dollars (Bitcoin, ETH and SOL), while globally the largest trading pairs in crypto markets are not in dollars (USD) but in Tether (USDT).
So since the currency that circulates most on Coinbase is the US dollar, the suspension of dollar withdrawals was enough to create a little panic, even though withdrawals in stablecoins, cryptocurrencies, or other fiat currencies were not suspended.
Moreover, these kinds of problems on Coinbase are not common, so users were caught off guard.
When the company publicly announced the existence of the problem, it also pointed out that deposits with debit cards and via PayPal had not been suspended, making it very clear that the problem only affected technical interaction with US bank accounts.
Coinbase is a publicly traded company, so it is obligated to provide important information regarding its operations to investors. Traditional financial markets were closed yesterday, so the problem had no impact on Coinbase’s share price.
COIN, the stock’s performance on the stock exchange
In this regard, it is worth mentioning that currently the stock does not seem to be enjoying good health on the stock market.
It is enough to mention that during 2022 it lost 74% of its value, and if we go back to the time of the placement in April last year, the decline rises to 81%.
Except for November 2021, when the crypto market hit its all-time high and Coinbase’s stock returned above $350, it has been a long and almost steady descent, with a real crash between March and May this year.
Despite this, it appears that the company is healthy, at least from what it has made known, although obviously the prolonged bear market in the crypto markets is causing it problems.
A prolonged bear market was in some ways expected in 2022, and it is certainly not the first of such magnitude that the company faces.
It is worth mentioning that the company has been in existence since 2012, so what it is experiencing is the third major bear market in the history of crypto markets, following the one in 2014/2015 and the one in 2018/2019.
Therefore, it does not appear either that it is unprepared to face yet another bear market or that it has any serious problems that would call its survival into question. However, there have long been many rumors that it is by no means immune to economic or financial problems.
Lately, the fear that it may have serious problems seems to have faded somewhat, so much so that since mid-May the decline of COIN on the stock market has actually stopped.
What probably drove investors away during the early part of the year was the fear of the consequences of a full-blown implosion of the crypto markets. But since this implosion did not occur, the situation now seems to be more sustainable than imagined until May.
What’s more, the sharp 2022 drop in Bitcoin’s price was smaller, in percentage terms, than both the 2014 and 2018 price drops, so in fact to date the crypto markets seem to be enjoying better health than they did during the previous bursts of the great speculative bubbles of 2013 and 2017.