Coinbase Raises $ 4 Billion In Cash In Crypto Winter Event

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Coinbase, which began listing on the Nasdaq in April in one of the most anticipated initial public offerings of 2021 as it was the first crypto exchange to go public, admitted to having stored money in the event. crypto winter.

See: Coinbases IPO Made A Lot Of People Rich (more)

The company has amassed $ 4 billion in cash as it prepares for further regulatory scrutiny and a host of business risks in the crypto industry, CFO Alesia Haas told Wall Street Newspaper.

Haas told the WSJ that the company is testing its balance sheet to make sure it has sufficient funds to prepare for a stricter regulatory regime, possible cyberattacks, or potential trade declines.

We want to make sure that we maintain those cash reserves so that we can continue to invest and develop our products and services in case we enter a crypto winter, Haas told the WSJ.

See: Is Crypto Too Risky? 12 Experts Weigh InFind: 10 Best Crypto Research Tools You Must Have As An Investor

Peter Cohan, professor of strategy and entrepreneurship in the MBA program at Babson Colleges and author of Goliath Strikes Back, told GOBankingRates that if he owns Bitcoin or cryptocurrency, the idea that Coinbase is raising funds for itself. protecting against a crypto winter would be cold in the back. my spine.

I would withdraw all my money from the crypto and put it somewhere more secure. I give Coinbase credit for recognizing how vulnerable it is to regulatory crackdown. But putting $ 4.4 billion where its mouth is is a strong warning that Coinbases’ business could quickly melt away if the SEC clamps down enough. I would get away as far as possible before that happened.

Coinbase acknowledged the so-called crypto winter potential in a letter to shareholders earlier this month.

See: Coinbase Just Tripled Revenue In First Post-IPO Profits Here’s Why You (Probably) Shouldn’t InvestFind: Crypto Powerhouse Coinbase closes office to go remote first; Will not have a physical HQ

The story continues

The wind is in our sails right now, and it feels good. But crypto is a volatile young industry and there will come a time when times will be tougher. We know this because we have had major crypto winters where funding was difficult to obtain, partners cut us off, and we lost much of our employee base. Tension rises during these times. We supported by enduring and without overreacting. It’s never as good as it looks, and it’s never as bad as it looks, the company said in the letter.

Coinbase announced its first profits as a state-owned company earlier this month, noting that it had tripled its revenue in the first quarter of 2021 with total revenue of $ 1.8 billion. Net revenue was $ 1.6 billion, including $ 1.5 billion in transaction revenue and $ 56.4 million in subscription and service revenue, according to the letter to shareholders. This compares to $ 585 million in fourth quarter 2020 revenue.

The action attracts investors who wish to get involved in Bitcoin and gain exposure to crypto, without owning the asset and therefore be subject to wild fluctuations.

See: Coinbase customers furious at response to hacked accounts and stolen fundsFind: Ready to invest in cryptocurrency? Start with just $ 1

Despite its good results, Coinbase said in the letter to shareholders that the rapid expansion of the crypto-economy is also creating challenges for the company, especially with increasing competition as new entrants enter the market. join the crypto-economy every month. Our competitors support some crypto assets that are experiencing high transaction volume and market capitalization growth that we do not currently support, as well as new products and services that we do not offer. We welcome these challenges because they indicate that the market we serve is growing rapidly, but we must also continue to act quickly to meet them, and that inspires us towards action and growth, the letter says.

Competitors, like eToro for example, are more diversified in terms of offerings. Shalom Berkovitz, CFO and Deputy Managing Director of eToros, told GOBankingRates that as a multi-asset investment platform, eToro benefits from diversification and is not dependent on any asset class in favor. The diversity of eToros’ product offering and its global footprint support long-term sustainable growth.

See: How COVID-19 Turned Day Trading Into Gen Investors Fun and Lucrative HobbyFind: How to Invest in Cryptocurrency: What You Need to Know Before Investing

Regulatory risks Coinbase may face include a provision in the crypto industry infrastructure bill to help foot part of the bill. The provision expands the definition of a broker to include any person who (for a fee) is responsible for regularly providing any service that transfers digital assets on behalf of another person, according to the text of the bill. This language would force crypto brokers to report client information to the IRS, CNBC reported. The bill does not exclude miners, software developers, stakes and others in the crypto economy who do not have customers.

Additionally, earlier this month, Securities and Exchange Commission Chairman Gary Gensler addressed crypto regulations, saying that right now we just don’t have enough protection. crypto investors. Frankly, right now, it’s more like the Wild West. Gensler added that this asset class is rife with frauds, scams and abuse in some applications. There is a lot of hype about how crypto assets work. In many cases, investors are unable to obtain rigorous, balanced and complete information. If we don’t fix these issues, I’m afraid a lot of people will be hurt.

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This article originally appeared on GOBankingRates.com: Coinbase Raises $ 4 Billion In Cash In Crypto Winter Event

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