Quote:
Originally Posted by Madman37
Hi all how are you. What is your view of Coinbase maybe going bankrupt and Bitcoin going down badly.
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Despite the snarky comments from some, you have asked a pertinent question. Let’s go to the reports - and the publicly acknowledged risks that Coinbase itself stated in its last Annual Report.
Chief among them to an investor in Coinbase itself is:
“Our management team has limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company…”
So you have asked a good question. Analysts noted over $800 million NOL and a potential need to raise more capital. But beyond that, existential risks are real and a growing concern. Their Z-score has dropped precipitously so much that it’s 1/100th above bankruptcy alert level (1.81 now and had been as high as 3.29)
For those who believe an exchange can’t go under - such short memories…Mt. Gox?
For those who believe financial risk can’t bring down a broker…Lehman?
More risks are enumerated by Coinbase below, but the TLDR for fans is this:
Crypto may be good/bad - same is true for gold, real estate, oil…do not let your valuation of the underlying commodity blind you to a broker/exchange’s actual future health.
Coinbase Risk Factors Summary
“Consistent with the foregoing, our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others, the following, which we consider our most material risks:
• our operating results have and will significantly fluctuate due to the highly volatile nature of crypto;
• our total revenue is substantially dependent on the prices of crypto assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected;
• a majority of our net revenue is from transactions in Bitcoin and Ethereum. If demand for either of these crypto assets declines and is not replaced by new demand for other supported crypto assets, our business, operating results, and financial condition could be adversely affected;
• the future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate. If crypto does not grow as we expect, our business, operating results, and financial condition could be adversely affected;
• cyberattacks and security breaches of our platform, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results, and financial condition;
• we are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition;
• we operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively;
• we compete against a growing number of decentralized and noncustodial platforms and our business may be adversely affected if we fail to compete effectively against them;
• as we continue to expand and localize our international activities, our obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions will increase and we may be subject to inquiries, investigations and enforcement actions by U.S. and non-U.S. regulators and governmental authorities, including those related to sanctions, export control, and anti-money laundering;
• we are, and may continue to be, subject to material litigation, including individual and class action lawsuits, as well as inquiries, investigations and enforcement actions by regulators and governmental authorities;
• if we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline, which could adversely impact our business, operating results, and financial condition;
• a particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition;
• we currently rely on third-party service providers for certain aspects of our operations, and any interruptions in services provided by these third parties may impair our ability to support our customers;
• loss of a critical banking or insurance relationship could adversely impact our business, operating results, and financial condition;
• any significant disruption in our products and services, in our information technology systems, or in any of the blockchain networks we support, could result in a loss of customers or funds and adversely impact our brand and reputation and our business, operating results, and financial condition;
• our failure to safeguard and manage our customers’ fiat currencies and crypto assets could adversely impact our business, operating results, and financial condition; and
• the theft, loss, or destruction of private keys required to access any crypto assets held in custody for our own account or for our customers may be irreversible. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any crypto assets, it could cause regulatory scrutiny, reputational harm, and other losses.”
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