Is Coinbase Safe? Detailed Review & Data

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Over the past decade, Coin­base has reached mil­lions of cryp­tocur­ren­cy traders and expand­ed to become the largest cryp­to exchange in the US. Despite its sol­id rep­u­ta­tion, Coin­base did not avert scruti­ny and skep­ti­cism. It has inten­si­fied in the past two years, dri­ven by the sharp upsurge and plunge in cryp­to prices in a short peri­od. But what has become the hot top­ic was the sud­den col­lapse of FTX, the for­mer largest cryp­to exchange worldwide. 

Nonethe­less, it remains an influ­en­tial fig­ure in the mar­ket. True believ­ers regard cryp­tocur­ren­cies despite not being a sure infla­tion hedge. Bitcoin’s inverse cor­re­la­tion with infla­tion showed how much macro­eco­nom­ic indi­ca­tors could affect cryp­to prices. Traders con­tin­ue to cap­i­tal­ize on cryp­to volatil­i­ty to gen­er­ate mas­sive gains. 

Giv­en this, Coin­base enjoys high cryp­to bal­ances. This for­mi­da­ble cryp­to exchange giant lever­ages the weak­ness of its small­er peers. Inflows and out­flows may some­times be over­whelm­ing, but its liq­uid­i­ty ensures it can sus­tain its oper­a­tions. Hence, this arti­cle will explain why Coin­base is a safe cryp­tocur­ren­cy exchange. 

What Makes Coinbase a Safe and Liquid Cryptocurrency Exchange 

As a cryp­to trad­ing new­bie, one often looks for those exchanges with low trans­ac­tion fees and secure user anonymi­ty. But a more impor­tant con­sid­er­a­tion is whether it can sus­tain busi­ness oper­a­tions with mas­sive transactions. 

Being in the busi­ness for over a decade, we may not have to ask our­selves, “Is Coin­base safe?” It has under­gone mas­sive ups and downs, such as the cryp­to bub­ble burst in 2017–2018 and the FTX fall­out in 2022. Its liq­uid­i­ty and wise token allo­ca­tion make it one of the most durable cryp­to exchanges. These are some rea­sons Coin­base is a safe cryp­to exchange. 

Stable monthly market share 

Since the FTX col­lapse, we have seen how Binance has swift­ly tak­en over the mar­ket. It dethroned Coin­base and kept a wide mar­gin from its peers for a long time. 

Even so, Coin­base showed it has not yet fal­tered and would not be anoth­er FTX despite the huge drop in traders’ con­fi­dence. Binance may be the giant now, but Coin­base is one of the orig­i­nal cryp­to exchanges. It has stood the test of time, fac­ing mas­sive cryp­to mar­ket shocks in recent years. 

But what makes it a mem­o­rable cryp­to exchange con­tender is its sta­ble mar­ket share. In Jan­u­ary 2023, its mar­ket share was 6.97%. It plunged to 4.58% in only a month, the low­est mar­ket share in many years. 

It rebound­ed in the fol­low­ing months but stayed with­in a 5–6% range. But since the sec­ond half of 2023, we can see a sus­tained increase in its mar­ket share before climb­ing to 6.2%. There have been some ups and downs, but they were much more man­age­able than in 2022. 

Image Source: The Block

At the end of the year, the mar­ket share increased again to 6.34%. As of today, it is record­ed at 6.35%. It may be low­er year-over-year but much bet­ter than in the pre­vi­ous months. The sus­tained rebound shows it can with­stand chal­lenges and regain momen­tum amid tight com­pe­ti­tion. It is indeed a resilient cryp­to exchange.

And if we com­pare it to oth­er exchanges, Coin­base had one of the most sta­ble mar­ket share changes in the past year. Take Binance as an exam­ple. It remains the largest exchange but has already lost about 25% of its mar­ket share after falling from 59% in Jan­u­ary 2023 to 35% today. 

We can attribute it to the recent con­tro­ver­sy where it admit­ted its fault for vio­lat­ing the US Anti-Mon­ey Laun­der­ing Act. Hence, its close com­peti­tors, such as Coin­base, OKX, and Upbeat, cap­i­tal­ize on it to gen­er­ate more traders. 

High cryptocurrency balance 

Anoth­er fac­tor to con­sid­er is the liq­uid­i­ty and avail­abil­i­ty of dig­i­tal assets. Giv­en its ade­quate bal­ance of pri­ma­ry cryp­tocur­ren­cies, Coin­base remains a huge cryp­tocur­ren­cy exchange. These include Bit­coin (BTC) and Ethereum (ETH).

Coin­base is the sec­ond-largest cryp­tocur­ren­cy exchange in the total Bit­coin bal­ance. As of this writ­ing, it has 411,762.68 Bit­coins or 2.2% of the total cir­cu­lat­ing sup­ply in the mar­ket. It also has a nar­row gap with Binance, the top Bit­coin hold­er, with 554,836.88 or 2.8% of the total mar­ket volume. 

Bitfinex comes as a close third with 388,742.04 or 2.0% of the total mar­ket sup­ply. The top three Bit­coin exchanges have a wide mar­gin from the fourth plac­er, OKX, with just 132,678.97 or 0.7%.

With regard to Ethereum, the total bal­ance in Coin­base is 2,185,579.12, or 1.8% of the total cir­cu­lat­ing sup­ply. It ranks third after Binance and Bitfinex with 3,770,920.82 or 3.1% and 2,349,649.56 or 2.0%, respec­tive­ly. Krak­en is in fourth place with 1,691,412.27, or 1.4% of the total cir­cu­lat­ing coins. These four largest Ethereum hold­ers are far larg­er than OKX, the fifth plac­er with 945,955.80 or 0.8%.

Even in oth­er cryp­tocur­ren­cies, Coin­base also has one of the largest reserves. It ranks sec­ond in USDC with 516,852,821.09, although it is far low­er than Binance with 1,454,578,122.56. It has a wide dif­fer­ence from OKX, the third plac­er, with 157,577,919.60. The remain­ing exchanges with USDC have less than a 100,000,000 balance. 

For small­er cryp­tocur­ren­cies, Coin­base remains pop­u­lar as it is one of the top ten hold­ers of their reserves. Sev­er­al exam­ples include DAI (fifth- 2,848,007.58), USDT (ninth- 35,157,653.02), SKL (sev­enth- 7,393,205.74), and USDP (fourth- 482,327.81).

Giv­en this, Coin­base appears to have ade­quate liq­uid­i­ty lev­els, allow­ing it to sus­tain high-vol­ume trans­ac­tions. This is a cru­cial aspect to con­sid­er in a high­ly volatile market. 

Prudent Token Allocation 

Traders should also con­sid­er the lev­el of reliance on a spe­cif­ic token or coin. The for­mer largest cryp­to exchange, FTX, may have neglect­ed this cru­cial aspect. Its reliance on its own tokens led to its unex­pect­ed down­fall in 2022. This led to cap­i­tal out­flows in many oth­er exchanges, and Coin­base was no exception. 

On a lighter note, Coin­base does not appear to be anoth­er FTX in the mak­ing, giv­en its high bal­ance of var­i­ous cryp­tocur­ren­cies. It is not heav­i­ly reliant on a sin­gle cryp­tocur­ren­cy. It holds var­i­ous cryp­tocur­ren­cies and is part of the top ten exchanges in many cryp­tocur­ren­cies it holds. 

Like most cryp­to exchanges, Bit­coin remains its most abun­dant reserve. It is a cru­cial token since many busi­ness­es around the world wide­ly accept it. Ethereum comes sec­ond, also used for busi­ness and gov­ern­ment trans­ac­tions. Many gov­ern­ment agen­cies are tak­ing Ethereum con­tracts for their services. 

These two cryp­tocur­ren­cies are essen­tial in var­i­ous states, espe­cial­ly Texas, which has the ninth-largest econ­o­my glob­al­ly. That is why fol­low­ing the require­ments and process­es of form­ing an LLC in Texas is eas­i­er with cryp­to payments. 

As such, Coin­base can with­stand a mas­sive out­flow of a sin­gle cryp­tocur­ren­cy. Thank­ful­ly, its high liq­uid­i­ty will help it cov­er the fore­gone cap­i­tal while refo­cus­ing on oth­er reserves. 

Key Takeaways

Coin­base has been through crests and troughs since its incep­tion a decade ago. Although it has a long way to go before it goes head-to-head with Binance, it has a huge poten­tial to out­per­form the third and sec­ond plac­ers. Its exis­tence for over ten years says a lot about its resilience and pru­dence. Hence, this cryp­to exchange promis­es safe­ty to cryp­tocur­ren­cy traders. 

This is a guest post by Ivan Ser­ra­no. Opin­ions expressed are entire­ly their own and do not nec­es­sar­i­ly reflect those of BTC Inc or Bit­coin Magazine.

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