The largest Cryptocurrency Exchange and trading firm Coinbase have seen a significant decrease in the price along with the various other cryptocurrencies. The reason is a Monday night report says SEC is investigating Coinbase as it is believed that they allowed Americans to trade tokens, which should be registered with the SEC.
Coinbase has seen the hardest hit, dropping 20 percent early this week. Meanwhile, related partners like MARA (Marathon DIgital) and MSTR (MicroStrategy) also witnessed a decline of more than 10 percent.
Coinbase’s 20% Drop Causes Crypto Names To Fall
Moreover, cryptocurrencies like Bitcoin ( the only cryptocurrency that SEC doesn’t consider to be Security) are outperforming with a 5 percent decline. Solana Lab’s Solana and Ethereum’s Ether are also down by 8 percent.
As a result, Coinbase would be taking some important actions as listed below:
- Coinbase would stop its affiliate program to reduce the cost, and also it is considered a “big red Flag”. Affiliate programs are the most commonly used marketing strategy to create an income source for influencers and content curators. As per the latest reports, Coinbase paid approximately USD 40 to the influencers for every new signup on their website. This has led to a huge cost to the company.
- Approximately 18 percent of the workforce will experience a layoff due to the cost reduction strategy. Layoffs are quite common to happen during recessions. The Coinbase Management team is also suspending Coinbase Pro, a professional trading platform.
After the collapse of big Hedge funds companies like Celius, Voyager Digital, and Three Arrows Capital, the crypto industry is quite scared and perplexed about the companies’ future ahead in the coming few years.
The last quarter has experienced many bankruptcies of the companies like TerraLuna, TerraUSD, Three Arrows Capital, and Celius.
So, Could Coinbase be next on the list?
This is quite a frequently asked question since Coinbase has experienced heavy pressure due to the sudden fall of the cryptocurrency market. Brian Armstrong (CEO of Coinbase) just said they’re harmed by the recession and the crypto winter is likely.
All these challenges are not new, but since Coinbase is a Public Company, unlike companies like Celius, Voyager, and 3AC, they need to deal with them smartly.
Is it worth investing in Crypto during such a time?
There is no time when the crypto market is not considered to be a low-risk game. And there are no chances it will become so in the coming few years. Currently, the prices are quite low, and there is a slight turnaround. Based on the chart, it is quite hard to predict whether a coin will follow an upward or downward trend.
There have been instances where many companies have seen huge growth and simultaneously huge drop. As a retail Investor, there is always a big risk due to extreme volatility. It is wise to invest in a diversified portfolio. Build a portfolio that has minimized risk.