Coinbase Global Inc COIN said that struggling cryptocurrency firms that failed to successfully navigate the economy engaged in risky lending practices.
What Happened: “We believe these market participants were caught up in the frenzy of a crypto bull market and forgot the basics of risk management,” said Coinbase in a blog post outlining its approach to cryptocurrency financing.
See Also: How To Buy Coinbase (COIN) Shares
Brett Tejpaul, head of Coinbase Institutional, Matt Boyd, head of Prime Finance, and Caroline Tarnok, head of Credit and Market Risk attributed the solvency concerns around entities like Celsius ,Three Arrows Capital (3AC), Voyager Digital Ltd VYGVF to “insufficient risk controls.”
“Notably, the issues here were foreseeable and actually credit specific, not crypto specific in nature. Many of these firms were overleveraged with short term liabilities mismatched against longer duration illiquid assets,” they said.
The Coinbase executives said that the cryptocurrency exchange had no financing exposure to any of these firms.
Despite maintaining a strong cash balance of over $6 billion, Coinbase has taken several measures in light of the market decline. These include layoffs, phasing out its “pro” trading platform and suspending its affiliate marketing program.
Price Action: Year-to-date, Coinbase shares are down by more than 70% as cryptocurrencies entered a bear market. Bitcoin BTC/USD, Ethereum ETH/USD and Dogecoin DOGE/USD are also down by over 70% from their peak prices in 2021.
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