The ongoing downward trend in the crypto market has put a number of companies in a tight spot. The credit crunch has affected the entire space across the board, but some have taken a worse hit than others. There are a number of companies that have ended up in a liquidity crisis and this has driven them to file for bankruptcy.
Three Arrows Capital, the crypto hedge fund, along with Voyager Digital and Celsius Network, are some of the companies that have filed for bankruptcy so far. Now, there are rumors that Coinbase, one of the leading crypto exchanges, is also facing a liquidity crisis. The first quarter of the year saw the exchange report a net loss of about $430 million.
The exchange also announced a hiring freeze in May and then eventually said that it would cut down its staff because of the difficult market conditions.
Possible insolvency
According to a recent report, Coinbase is now putting a stop to its affiliate marketing program in the United States. The suspension will come into effect from July 19th, as the global crypto industry is experiencing a fall in prices and this has resulted in poor performance for a lot of companies.
Investors are now becoming spooked because of the developments taking place in regard to Coinbase. One of the leading crypto influencers in the market, Ben Armstrong took to Twitter to warn his followers that Coinbase could be on the verge of bankruptcy, given the recent events.
Stocks take a hit
It should be noted that the recent bear market in the crypto industry has taken its toll on Coinbase. Since the exchange is publicly listed, its stock’s performance is in tandem with that of the crypto market. After getting listed on the NASDAQ last year, the company’s share price touched an all-time high of $357, but it has plunged almost 85% since then.
Investor confidence has also taken a hit because of poor performance. Coinbase recently saw its stock rating downgraded by Goldman Sachs to ‘sell’ from ‘neutral’. Likewise, the company’s valuation is also not doing so well. Last year at its all-time high, Coinbase had been valued at $75 billion, but it has come down to a value of $12.4 billion since then.
Moreover, its trading volumes have also declined significantly and its woes had already begun in the first quarter of the year when it reported a net loss.
Main rivals
As opposed to Coinbase, its main competitors and rivals appear to be doing much better financially. For instance, Binance seems to be holding its own even during the bear market, as it recently hired people for 2,000 new positions, while Coinbase has filed 18% of its staff.
In addition, Binance also introduced a zero-fee Bitcoin trading option for its clients, which is expected to help the exchange dominate the US market and take over Coinbase. The latter has received a lot of criticism for its high trading fees and this might prompt people to switch to Binance.
