Crypto markets work in definitive cycles and have strong bullish and bearish phases. And this is the reason that Coinbase has out $4B aside to outrun the crypto winter that will evidently occur. The last two quarters have been very strong for the company, which made it possible for them to keep such a huge amount aside. This move also shows that the company understands that the markets are going to have a tough time in the near future.
Coinbase’s plan to keep operating
The current crypto volumes are very good, and Coinbase is making a lot of money. But as the markets become bearish, these trading volumes will drop. But this won’t last forever, and Coinbase will be back at making a lot of money again. At the same time, the regulatory pressure from the US will also be a problem for the company. This is why the company is piling cash to keep their operations intact even if they face losses.
The company said that they are getting prepared for the worst while the times are still good. Coinbase predicts that costs from new legislation, cyber-attacks, compliance costs will be present during the crypto winter. The company believes that no matter what the market sentiment is, the growth of the company should not stop. Now generally, the crypto winter lasts for around 1-3 years, which means that one never knows how much cash will exactly be needed to cross that phase. But I think Coinbase has planned enough, and the $4B they put aside will be enough.
The biggest problem with Coinbase is that they are heavily reliant on transaction fees. So, in case crypto enters a bear market and prices drop, the daily transaction volume will bolster significantly. And the cash they are saving will have a lot of expenses to cover. So, I hope that the amount they put aside is generous enough.
I don’t know if we are in a bull or bear market right now. But it is 100% sure that if there is a bullish market, there has to be a bearish one. This is why if you are super positive that crypto is not becoming bearish ever again, then think again. Crypto winter is inevitable, and if you believe in cryptocurrencies, this phase will be the best time to invest.
What are your thoughts on Coinbase’s preparation for the crypto winter? And do you think that the amount they put aside will be enough? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.