Several posters on various internet communities have implied that the recent fall in bitcoin prices happened due to speculation that Coinbase is insolvent. No one has provided evidence that this assertion holds truth, so let's look at the facts that we know.
The Ethereum Classic Mess
In one sentence, I'll describe the mess that we saw with Ethereum and Ethereum Classic: exchanges mistook the desire and demand for Ethereum Classic and followed the hard fork with Ethereum, when they could have also kept funds in Ethereum Classic as well. In other words, exchanges tried to pick the winner and force it on the markets and the reaction was violently against this with Poloniex on its own showing higher volume for Ethereum Classic than Ethereum.
I don't care where anyone stands on this; simply put, the market has the final say and what I saw in the market is that at the time there was (and is) a huge demand for Ethereum Classic along with a huge desire to trade it. As I type this post, this is the sixth day in a row that Ethereum Classic has had higher trading volume than Ethereum - and yet it doesn't have near the exchanges that support it ($14 million trading versus $21 million trading). This is a market signal. Let's respect markets, not tell them what to do. What are we, the Fed?
GDAX and Coinbase
GDAX picked the winner - Ethereum. But unfortunately, the demand for Ethereum Classic was high, so they recanted their position and tweeted that they would eventually allow Ethereum buyers to have access to their Ethereum Classic as well, but wouldn't support it. Some posters think the problem is the following for GDAX (owned by Coinbase):
- GDAX assumed no one would want ETC.
- GDAX didn't have any ETC because they didn't think there would be demand.
- GDAX then saw demand for ETC and users begin requesting their ETC too.
- If GDAX doesn't offer ETH buyers ETC - since that was in the realm of possibilities and other exchanges did - some users may sue.
- GDAX needs to now purchase ETC live on the market place with funds it may not have.
- Evidence is that Coinbase has raised fees.
These are the claims that I've seen posted; however, I don't see any evidence for assertions 4 and 5 and bitcoinmeister confirms that they are raising credit card fees (insightful comment below):
They are raising fees for credit card users. This is a fact.
The assumption behind both of these assertions is why is it taking so long for GDAX to disburse the funds they owe. When you start to see posters compare Coinbase to MtGox, you have to realize that this will create some panic since the MtGox failure caused a massive collapse in bitcoin's price. Almost every bitcoinaire remembers MtGox.
I think that most exchanges handled the Ethereum Classic and Ethereum mess completely wrong, with the exception of Poloniex. Poloniex was rewarded with $100+ million in trading over three days and continues to be one of the top trading platforms for Ethereum Class and I predict has gained many customers because of this mess. It also teaches a lesson for future hard forks that exchanges should be careful about which direction they go and their responsibility for keeping both funds in case of unanticipated demand.
The failure of the DAO and the community's constant attempts to get around their failure provide examples that the entire community lacks maturity. Let's never forget that Satoshi tried to prevent too much use of bitcoin early in bitcoin's beginning because Satoshi knew all the bugs hadn't been resolved. The Ethereum community has done the opposite. In the long run, Ethereum will mature, but the community needs to adopt a humble mindset and end the arrogance of quick-fixes without considerations of unintended consequences.
Bottom Line
I am skeptical of assertions that Coinbase is facing trouble. If someone provides evidence other than rumors, that is one thing. Be careful about believing and panicking on rumors because they might be wrong. Do I agree with people who think Coinbase handled the Ethereum mess wrong? Yes, and I suspect they've learned from this mess. But even mishandling the situation with Ethereum and Ethereum Classic does not prove they are insolvent. Let's not make baseless accusations unless there is strong evidence.
Note: I executed a buy order for bitcoin in the range of $630-640 and I will be a buyer if prices head lower. I also recently executed a buy order for Ethereum and will continue to do so if its prices head lower. Let's see where the market takes us!