Coinbase Claims It Had No Exposure To Bankrupt Crypto Companies

Coinbase claims it had no exposure to bankrupt crypto companies and said that the platform was unscathed by the contagion of these companies that faced liquditiy issues like Voyager, Celsius, and Three Arrows Capital so let’s have a closer look at our latest Coinbase news.

Coinbase claims it had no exposure to Three Arrows Capital, Celsius Network, or Voyager Digital which are companies that collapsed and filed for bankruptcy with the crypto market crash. The company said many companies are struggling because they became overleveraged and didn’t manage their balance sheets well. Coinbase said:

“We believe these market participants were caught up in the frenzy of a crypto bull market and forgot the basics of risk management. Unhedged bets, huge investments in the Terra ecosystem, and massive leverage provided to and deployed by [Three Arrows Capital] meant that risk was too high and too concentrated.”

It came at a time when companies involved in crypto continued to look for ways to shave down the overhead and reduce costs. BlockFi is a Celsius competitor that operates a similar lending business model which started offering employees buyouts after cutting their staff by 20% a month before.
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OpenSea for example laid off staff by the same amount a week ago. Coinbase reiterated and hasn’t engaged in risky lending practices and focused on building the business in a responsible way. The company said one of the main goals is to be safe and have a trusted bridge for investing in crypto.

The company did note that the venture program made a nonmaterial asset in Terraform Labs as the company that oversaw the collapse of the Terra ecosystem that erased billions of dollars worth of funds over the course of a few years. Coinbase pointed out that it will back the investmetns 1:1 and said that the institutional lending activity they offer at Coinbase is backed by collateral. The company said it has experienced no losses from the financing book or counterparty insolvencies. Celsius’ lending business relied on the company using the client funds with no customer discretion:

“A leading prime broker, whether in crypto or other asset classes, should understand and effectively manage counterparty and liquidity risk for the safety of their clients, shareholders, and the market.”

Amid the chills of the crypto winter, Coinbase made moves to reduce the operating costs and the company slashed 18% of the workforce to prepare for a longer downturn in the price of the assets this week, the company pressed a pause button on the affiliate marketing program and told influencers it cannot support the program because of the bearish market sentiment.