Coinbase’s Short Positions in the Crypto Market
Coinbase, a leading cryptocurrency exchange, has been advocating for unity among the crypto industry and investors to combat the regulatory takeover by the SEC and other US authorities. Interestingly, quarterly reports submitted by Coinbase to the SEC reveal that the company has been engaging in shorting crypto assets through derivative financial strategies. Short positions are typically taken against the market to profit from lower prices. Coinbase’s reports show the following breakdown of their short positions:
– $136.23 million in shorting positions with futures contracts (as a hedge)
– $12.46 million in shorting positions with futures contracts (not as a hedge)
– $81 million in “crypto assets borrowings with embedded derivatives” (as a hedge)
– $70.46 million in “crypto assets borrowings with embedded derivatives” (not as a hedge)
On June 30, 2023, Coinbase held a total of $119.66 million in possible short positions. Additionally, the company had $13.10 million in deposited collaterals on December 31, 2022, and $23.08 million on June 30, 2023.
Coinbase’s Use of Crypto Futures
A Twitter account called Rho Rider pointed out that Coinbase has been shorting the market through crypto futures, which they have now started offering to investors. The tweet suggests that Coinbase’s “Risk Solutions” desk may front run investors by using this tool. This raises concerns about Coinbase using crypto futures not only as a provider but also for their own financial gain.
Past Short Positions and Borrowed Assets
Previous quarterly reports indicate that Coinbase has held even larger short positions and borrowed assets. For example, they had over $660 million in borrowed assets on December 31, 2021, after Bitcoin’s all-time high. This information adds further context to Coinbase’s involvement in shorting the crypto market.
In conclusion, Coinbase’s public reports suggest that they have been engaging in shorting crypto assets through derivatives. This raises questions about their transparency and potential conflicts of interest as they enter the crypto futures market. Investors should be aware of these practices when considering Coinbase as a platform for their cryptocurrency trading.
Hot Take
Coinbase’s involvement in shorting the crypto market raises concerns about the company’s integrity and the potential for conflicts of interest. This revelation may have a negative impact on the trust and confidence of crypto investors in Coinbase as a leading cryptocurrency exchange.
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