Coinbase Losses and Bankruptcy See Stocks Plunge

Coinbase CEO and co-founder Brian Armstrong managed to quell fear in a Twitter thread

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Coinbase posted significant losses in the first quarter, spooking investors (Image: AFP/Getty Images)

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Coinbase posted significant losses in the first quarter that spooked investors (Photo: AFP/Getty Images)

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There have also been major price shocks due to Elon Musk’s recent abrupt decision to block people from using Bitcoin to pay for Tesla cars, as well as the crypto crackdown in China.

Anxiety only increased after key crypto exchange Coinbase issued a warning about the impact of bankruptcy in its first quarter (Q1) earnings report.

Coinbase co-founder and CEO Brian Armstrong sought to allay fears over Coinbase’s future (Photo: AFP/Getty Images)

So what did Coinbase say – and why did it surprise investors?

Here’s what you need to know.

What is Coinbase?

Founded in 2012 by current CEOs Brian Armstrong and Fred Ehrsam, Coinbase is a cryptocurrency exchange.

It gives people the ability to buy, store and sell most major cryptocurrencies and provides real-time information on their value.

The platform also allows users to trade non-fungible tokens (NFTs) and run debit cards for crypto users.

Coinbase offers users several crypto solutions (Image: Getty Images)

According to its website, the company has over 98 million verified users in over 100 countries who trade around $310 billion in cryptocurrencies every quarter.

What did Coinbase say about the bankruptcy?

Coinbase added a boost to crypto investor anxiety this week after posting significant losses and talking bankruptcy.

Shares of the platform halved this week after Coinbase posted a net loss of $430m (£350m) in first quarter results, according to news agency AP.

This loss was caused by a drop in revenue generated from cryptocurrency transaction fees, as well as a total drop in user numbers of almost a fifth (19%).

On Wednesday, May 11, its stock price was $53.72.

When it was listed 13 months ago, the price was $429 per share.

In a letter to its shareholders, Coinbase said it did not expect its losses to be part of a long-term trend.

Another concern was generated by a statement in its first quarter earnings report warning customers of what could happen if Coinbase goes bankrupt.

It read: “Crypto-assets we hold on behalf of our clients may be subject to bankruptcy proceedings.”

Coinbase’s share price fell in the face of a massive loss in the first quarter (Photo: AFP/Getty Images)

In this case, the exchange said its users could lose all the cryptocurrency stored in their accounts as they would become “unsecured creditors”.

This means that they will find a way to dissect the people owed by the company if the company runs itself.

Their funds will also become inaccessible.

What does Coinbase CEO Brian Armstrong say?

This statement was retracted by Coinbase co-founder and CEO Brian Armstrong in a Twitter thread posted Wednesday, May 11.

He sought to reassure users by emphasizing that “your money is safe at Coinbase.”

Armstrong said the company was “not at risk of bankruptcy” and the statement was only included because of new requests from the U.S. Securities and Exchange Commission (SEC), the Wall Street regulator. .

“We have included a new risk factor based on an SEC request called SAB 121, which is a new disclosure requirement required for public companies holding crypto assets,” he said. electronically to third parties.

Armstrong apologized to users and pointed out that the Coinbase crypto wallet will give users more power over their assets.

Coinbase Losses and Bankruptcy See Stocks Plunge

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Coinbase Losses and Bankruptcy See Stocks Plunge

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