Nassim Taleb, author of the best-selling book The Black Swan, believes Coinbase, the largest cryptocurrency exchange in the US, “sucks”.
In a recent tweet, Taleb Told That Coinbase has negative cash flow, meaning it has more money going out than money coming in, a “grim” future, even if the cryptocurrency industry somehow recovers, and its owners are being bailed out.
“My point is they are cash-flow negative, w/ a terrible future (even if crypto comes back) & the OWNERS are getting kicked out. The company sucks,” he said.
Taleb said he does not believe Coinbase will face the same issues that FTX, once the world’s third largest cryptocurrency exchange, faced and ultimately failed. “I didn’t say anything about their holding and the risk of explosion, no analogy [FTX],” They said.
As mentioned, speculation about FTX and Alameda’s health increased Reports in early November revealed that the investment firm’s balance sheet was loaded with FTT Token, FTX’s native token. FTX on Nov 11 announced that it had filed for Chapter 11 bankruptcy in Delaware, ending a desperate attempt to raise funds.
The collapse of FTX has also sent crypto prices into free fall. Bitcoin has been trading around $16,000 for the past few weeks, which is its lowest level in two years. The broader crypto market is also down about 20% over the past month.
Is Coinbase in trouble?
Last week, famed short seller Jim Chanos, who made a killing with his early bet against Enron, criticized Coinbase’s business model, saying that the cost is too high for the current environment.
In fact, Coinbase charges the highest fees in the industry. The exchange charges a fee of around 0.5% for cryptocurrency sales and purchases. This is, of course, on top of the transfer fee which can go up to 5%.
Chanos believes that a company like Fidelity or Vanguard could offer basic crypto trading with fees that dramatically undercut Coinbase. To stay relevant, Coinbase may have to reduce fees, which will then make up the bottom line.
In the third quarter of the year, Coinbase reported a net loss of $545 million on revenue of $576 million. This has also had a negative impact on the company’s shares, which are already down more than 80% this year.
Notably, Coinbase’s institutional business hasn’t been very profitable either. Nearly $133 billion in trading was done by institutions in the third quarter, but only $19.8 million translated into revenue for Coinbase.
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