The latest news concerning Coinbase, one of the most prestigious crypto exchanges in the blockchain world, has been remarkable and diverse in recent days. Indeed, there is good news on the user front: around 19 million users verified in 2022.
However, unpleasant news on the stock side of the exchange, which seems to have plummeted in the day yesterday. On the legal side, Coinbase also faces more than a few bumps in the road, having recently been sued by the US Supreme Court. But let’s proceed in order.
Coinbase beats bear market: 19 mln verified users over the year
As anticipated, the crypto exchange Coinbase seems to know no crisis, as it is showing impressive user growth despite a sharply bearish cryptocurrency market.
Indeed, according to Finbold‘s data, 19 million new users have been verified for the platform between 31 December 2021 and 30 September 2022, an impressive number estimated on a growth of about 21.35%.
Implicitly, these numbers translate to at least two million verified users per month for the exchange in 2022. At the end of Q1 2022, Coinbase’s user base was 98 million, 9 million more than the 89 million recorded in Q4 2021. In the second quarter of 2022, 103 million and, in the third quarter of this year, as many as 108 million.
This sharp increase in the user base is reflected in Coinbase’s global market share: it was 3% on 6 December 2022 compared to 2.6% the previous month. A figure that has increased since September. Incidentally, Coinbase’s lowest market share was in July this year, 1.6%, and its highest was in November 2021, at 4.2%, when the cryptocurrency market was at its peak.
Of significant importance is the fact, mentioned above, that the crypto market is in a decidedly bearish phase that has been going on for months, further exacerbated by the collapse of FTX. So, one wonders how Coinbase has managed to engage so many new users despite a critical time for the blockchain world.
Following Finbold’s lead, this steady growth in verified users is due to several factors, such as the trading platform’s business model. Indeed, the exchange is advertised and equipped with innovative marketing, a strategy involving factors such as referral programs and unique features, including the ability for users to send cryptocurrencies as gifts.
Moreover, this trend could potentially continue in the near future, as the exchange has expressed its plans for global expansion. Particularly towards Europe, while, on the other side of the Atlantic, regulators seem determined to regulate cryptocurrencies properly.
Coinbase stock in the news: crypto exchange at record lows
During yesterday’s trading day, Coinbase’s stock plummeted to all-time lows, as the fear of experts and users definitely became apparent. Specifically, shares of Coinbase Global (COIN -9.18%) as of 3 PM (EST) were down nearly 9% and continuing to fall.
The move was particularly unusual considering that the S&P 500 and many cryptocurrencies, including Bitcoin, were all active today. However, fear is definitely starting to grip investors regarding Coinbase’s long-term prospects.
To make the point, we know that, according to Morningstar data, Coinbase’s bonds are currently trading for $0.52 per dollar. In other words, if the company is able to meet all of its long-term debt obligations, these bonds themselves have a substantial guaranteed upside.
However, bondholders would rather sell now than risk Coinbase’s insolvency later. Of course, among the fueling fears for Coinbase is the recent collapse of the FTX exchange. Whose founder, Sam Bankman-Fried, was arrested just over 24 hours ago.
In fact, investors fear that all cryptocurrency exchanges will eventually collapse in a similar fashion, including Coinbase. In addition, common qualms include Coinbase’s relationship with USD Coin (USDC -0.06%).
As we know, Coinbase partly owns USD Coin with Circle Internet Financial, a factor that, in the third quarter alone, generated over $100 million in interest income to the platform, largely from USD Coin.
The problem is that Circle has just ended plans to go public, which could indicate its rethinking regarding its business model and consequently its relationship with Coinbase.
In addition, rival exchange Binance, the world’s largest cryptocurrency exchange, appears to be encouraging its users to stop using USD Coin. This could therefore lead to a decline in the use of this stablecoin, negatively affecting interest income for Coinbase.
Legal problems for Coinbase: the Supreme Court subpoena
Another recent problem for Coinbase this time comes directly from the US Supreme Court. Which has sued the platform, against which, in recent weeks, two other lawsuits had already been filed that required the courts to intervene.
The first lawsuit, in particular, concerns a user who demanded compensation of $31,000. Which for the exchange means having to reimburse the amount lost after the user granted remote access to a Coinbase operator, who later turned out to be a fraudster.
Whereas the second lawsuit challenges Coinbase for insufficient information provided at an auction, and the resulting violation of the California State Consumer Code.
The information in dispute concerns participants who were in no way obligated to buy or sell Dogecoin or other cryptocurrencies in order to join the lottery, causing uncertainty and leading some users into error.