Zerodha’s Nithin Kamath Warns Indian Crypto Investors as Coinbase Falls to Record Lows

Zerodha co-founder Nithin Kamath warned Indian investors against the prospect of US cryptocurrency exchange Coinbase Global on Twitter.

Coinbase, the largest crypto exchange in the United States, has seen its shares fall 78% since its initial public offering (IPO) in April 2021. The cryptocurrency brokerage reported a loss in the first quarter this week, revenues having fallen 27% compared to a year ago, without estimates. Coinbase posted a net loss of $430 million in the first quarter, or $1.98 per share, due to lower sales and active users.

As a result, Nithin Kamath once again mocked the cryptocurrency market and claimed that customer assets could be at risk if Coinbase fails.

He advised Indian crypto investors to be aware of Coinbase’s dramatic downfall and added that “trading crypto with exchanges comes with risk.”

“Coinbase latest filing: Clients’ assets could be at risk in bankruptcy. Indian crypto investors on exchanges should also be aware of this. Unlike the stock market where shares are held in a depository with a custodian and not have no broker risk, crypto with exchanges carry risk,” Kamath wrote on Twitter.

Coinbase Global, like the rest of the cryptocurrency market, is having a very tough week. Coinbase posted a net loss of $430 million in the first quarter, or $1.98 per share, due to lower sales and active users. Analysts had expected earnings of 8 cents per share. Revenue was down due to lower trading volumes and monthly active users were down 19% from the fourth quarter.

It’s not bad for filing for bankruptcy, but America’s largest crypto exchange just mentioned the B-word in a regulatory filing, painfully reminding its customers how badly things could turn out for them if Coinbase were seriously distressed. .

In its quarterly report, Coinbase added a risk disclosure: if the company were to file for bankruptcy, the court could treat the assets of customers the exchange is the custodian of – their Bitcoin, Dogecoin or otherwise – like Coinbase’s assets. . And they would be last in line for repayment, forcing normal people, unaccustomed to the ins and outs of federal bankruptcy court, to collect their money along with everyone else who owed money through the swap.

Coinbase was the custodian of $256 billion in customer money on March 31, according to the filing. Chief executive Brian Armstrong quickly took to Twitter to elaborate, saying the company was not at risk of bankruptcy and user funds were safe.

US courts have yet to deal with the bankruptcy of a cryptocurrency exchange. However, the so-called general unsecured creditor will be the last to collect the money. Ahead of them would be the senior creditors – Coinbase has $2 billion in senior unsecured bonds outstanding – as well as the lawyers and bankers who help any company deal with bankruptcy, racking up potentially huge bills along the way. .

Users would have to complete paperwork demanding what is owed to them, file it on time, and potentially wait months or years for payment. Often, lower ranking creditors end up with pennies on the dollar.

Coinbase bonds maturing in 2028 and 2031 both fell below 70 cents on the dollar this week – far from near-bankrupt levels, but in line with some of the riskiest high-yield debt in the market.

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