an 85% drop, mass layoffs and a problem beyond the cryptocurrency crash

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The second half of 2020 and the first months of 2021 brought a rally for Bitcoin and other cryptocurrencies like we had not seen since Christmas 2017. From that moment on, cryptocurrencies were left out of the general conversation and three years later came the boom. On November 8, 2021, the last historical maximum was registered, about $67,500 per bitcoin. Now it barely exceeds 20,000. She sank.

This story intersects with that of Coinbase, possibly the most popular exchange for trading and storing cryptocurrencies. A few days after that Bitcoin all-time high, Coinbase also recorded its peak per share, $368.90. Now worth $51.58.

The difference between the two accounts is that Coinbase is publicly traded and has 6,000 employees. or had, because it has laid off 18% of its staff. The 1,100 left out they found out about the dismissal when they stopped being able to access their corporate email and received a message from HR in their personal email advising them of the loss of access. Brian Armstrong, the CEO, showed some regret for the ways in an official statementalthough he argued it as a measure to prevent someone affected from taking confidential customer information.

Winter has arrived.

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Drop in income due to the fall of cryptocurrencies and recession in sight

The current situation in the cryptocurrency market contextualizes such a decision too well: the fall in value of cryptocurrencies (Bitcoin has lost 71%, Ethereum 79%, Cardano 85% and Solana 90% from maximums) that has dynamited much of the interest in them, thereby reducing transactions and therefore the commissions that Coinbase charges, and as if that were not enough, its recent launch of a platform for trading NFTs was disappointing.

There is also the fact that a workforce of 6,000 employees, and even the almost 5,000 that will remain from now on, sounds oversized for the Coinbase activity type. FTX, a competitor, has about 300 employees according to his own CEO on Twitter.

Coinbase’s small print on what would happen to its clients’ assets in the event of bankruptcy, another new slab

Nevertheless, nothing has been as dangerous as Coinbase’s fine print in the event of bankruptcy, which allows its creditors to collect their debts by taking the cryptocurrencies of its users. Not too surprising to those versed in these matters, a phrase often used to describe the best way to store cryptocurrencies is “if you don’t have the keys, they aren’t really yours.” In the case of Coinbase, store them there (other than buying them) could lead to being left without them in the event that the company went bankrupt. With an 85% drop in market value, it no longer seems like such a remote option.

“Because crypto assets held in custody may be considered the property of a bankrupt company, in the event of bankruptcy, crypto assets held in custody on behalf of our clients could be subject to bankruptcy proceedings and such clients could be treated as our general unsecured creditors.

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Faced with hostile reactions after that announcement on May 11, 2022, a week later the CEO had to speak publicly to calm things down. “Coinbase does not face any risk of bankruptcy.” A month later, his reassuring words don’t seem to have had an effect. Upside down: the increasingly clear prospect that the economy is entering a new recession (something Armstrong himself commented in the layoff statement) does not help, and contributes to being bearish for the cryptocurrency market. “Commercial revenue, our largest source of income, has dropped significantly,” he commented. “We grew too fast.”

It is unknown what will happen in the coming years. After all, Bitcoin has had year-over-year highs for almost every year of its life.

If Bitcoin manages to recover from the bump and return to exceed its all-time highs, approaching or exceeding the psychological ceiling of 100,000 dollars per coin —something that its staunch believers consider inevitable—, the situation of Coinbase could well be reversed, which would presumably shoot up its prices again. income.

Yes ok this blip may have eroded his reputation in a way that’s hard to forget: Although it has always stood out as the friendliest platform to carry out these operations, the fact that the cryptocurrencies of its clients are assets that can be seized by the creditors of the company may make more than one aware of the convenience of using a physical wallet. Your keys, your properties.

The second half of 2020 and the first months of 2021 brought a rally for Bitcoin and other cryptocurrencies like…

The second half of 2020 and the first months of 2021 brought a rally for Bitcoin and other cryptocurrencies like…

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