CZ brings Coinbase's liquidity into question

Plus: Lessons from rug pulls and more from around the web

November 23, 2022

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Catch up on the past week in crypto in 10 mins or less. Here's what we're covering today:

  • Binance vs Coinbase

  • Types of rug pulls

  • More from around the web

BINANCE VS. COINBASE

Just two weeks after the collapse of rival exchange FTX, led in part by the tweets of Binance founder and CEO Changpeng Zhao (CZ), the Binance founder is now taking shots at Coinbase.

As we covered last week, the fallout of the FTX collapse is leaving many companies in the crypto ecosystem scrambling. One such company is Digital Currency Group, which is the parent company to Grayscale, Genesis, and Coindesk, among others. Genesis, a crypto lender, is reportedly on the brink of bankruptcy while Grayscale, a crypto asset manager, is facing questions about its reported holdings.

Grayscale reportedly holds 635k Bitcoin on Coinbase. However, Binance CEO CZ tweeted in a since-deleted tweet yesterday, that Coinbase only held 600k Bitcoin in total. Coinbase CEO Brian Armstrong refuted those claims, citing his company's publicly available financials:

However, some are still worried about Coinbase's solvency. Genevieve Roch-Decter on Twitter gave some insight on the situation at Coinbase and why some are worried.

Here's what she said:

  • Coinbase has $95 BILLION in customer crypto assets

  • But the exchange relies on high trading volumes to cover massive operational costs

  • Bear market + lowered interest in crypto = low trading volumes, this spells bad news for profitability of the core business

But, Coinbase is regulated by the SEC and their financials are public, so they have to be more transparent (looking at you, FTX) about what they're doing with customer funds, so there is seemingly no funny business.

TYPES OF RUG PULLS TO LOOK OUT FOR

Frankly, we're sick of the scams. Many in crypto are building tools that will actually be useful and interesting, but like we've seen with FTX, there are still those looking to pull the rug on the masses.

This thread on twitter did a great job of breaking down all of the different types of rug-pulls to look out for.

These include The Basic Rug, The Classic Rug, The Slow Rug, The Sly Rug, The Pump and Rug, and much more. While the examples of these are virtually endless in the crypto ecosystem, the fact remains that no utility = no value.

Most of these scams involve someone pumping up the value of some new token with either a marketing tactic, a partnership announcement, a list of prominent investors, or just an outright scam. Regardless, the point is to dump the bag on the masses who are investing in earnest.

In a bull market, these scams worked great, because everyone wanted in on the next big thing. Now the tides are going out, people are leaving crypto and as Warren Buffett once said "you only find out who's swimming naked when the tide goes out". Hopefully, we'll see less of these as time goes on and crypto grows in legitimacy and utility.

More from around the web(3)

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