After laying off more than 1,000 employees in June, Coinbase has made further changes to its business strategy. According to inside information, the exchange has recently paused its affiliate program. As a result, some members of the crypto community have suggested that Coinbase could be insolvent. To justify their thinking, one of them writes that removing a $5 incentive is a big red flag, as well as asking what is the estimate of the average income that customer could generate over the years. Secondly, Binance has cut trading fees for some pairs to zero this month. As a result of this and other points, Binance surpassed its rival for the first time in the number of bitcoins in custody.
After laying off employees, Coinbase ends affiliate program
With its shares 83% below the price of its initial public offering, which took place in April 2021, Coinbase does not appear to be handling the bear market. After laying off more than 1,000 employees last month, the exchange has now halted its affiliate program as well.
“We regret to inform you that Coinbase will be temporarily ending its Affiliate Program in the United States with an effective date of Tuesday, July 19. This was not an easy decision, nor was it taken lightly, but given the cryptocurrency market conditions and outlook for the rest of 2022, Coinbase cannot continue to support incentivized traffic on its platform.”reads an email leaked by Insider.
As several companies have gone bankrupt in recent months due to liquidity problems, some users have pointed out that such a move by Coinbase is a big red flag.
“Coinbase just canceled their entire affiliate program. This is a big red flag. I fear that a liquidity crisis is looming. Yes, this could simply be the result of cost cutting efforts. But they are not willing to pay $5 for a new user? It seems strange to completely close the program. What is your LTV of a user?” writes Nate O’Brien, who has a channel with more than 1 million subscribers.
Yes this could simply be a result of cost cutting efforts. But they aren’t willing to even pay $5 for a new user? Feels strange to completely shut down the program. What’s their LTV of a user?— Nate O’Brien (@nateobrienn) July 15, 2022
While it is hard to believe that a publicly traded exchange is insolvent, it is worth remembering that Coinbase issued a shocking statement in May, stating that the cryptocurrencies of your clients will be yours in case of bankruptcy.
Binance hiring and lowering its fees to zero
Coinbase’s biggest rival, Binance, even mocked competitors who were laying off employees after spending millions on Super Bowl ads. In addition, he recently cut trading fees for some pairs to zero, even drawing the attention of legendary trader John Bollinger. Perhaps due to this difference in stance, Binance overtook Coinbase for the first time in the number of bitcoins in custody. According to data from Glassnode, shared by a subscriber, such a change took place in the midst of this latest bear market.
“The flippening: Binance overtakes Coinbase, holding the most BTC of any exchange”.
Finally, it is possible that Coinbase, fearing a crisis, ended up creating its own, opening up even more of the market to its competitors.