Is Coinbase Manipulating the Bitcoin Market?

On the evening of January 11, Beijing time, Coinbase, one of the world's largest compliant crypto asset trading platforms, experienced a problem with its trading system. A number of users reported that Coinbase's web and mobile apps were unable to handle transactions and withdrawals. Later, Coinbase officials discovered the issue and began investigating the issue at 22:46 Beijing time on January 11.

It took Coinbase more than four hours to fix the problem until 2:39 PM on January 12.

The outage is believed to be the main cause of the market crash.

The price difference between Coinbase and the major platforms

According to Coinbase Support's official description of the problem, there will be a delay in user transactions, especially when users make purchase transactions.

In other words, there was little new buying at Coinbase.

This has led to a huge price gap between Coinbase and other major exchanges. At one point, BlockBeats found, there was a price gap of $1,000 between Coinbase Pro and Huobi. However, some Twitter users found that the price difference between Coinbase and other major exchange platforms was more than 3,000 euros in terms of the euro standard.

Is Coinbase manipulating the market?

According to cryptocurrency analyst Willy Woo, the main reason for this round of bitcoin's decline may be the outage of Coinbase. Coinbase had a malfunction during the price correction from $41,000 to $38,000, which prevented it from buying, causing a negative premium of as much as $350 for bitcoin on the Coinbase platform. Since Coinbase prices are used as the data source for the Bitcoin Index for many bitcoin futures contracts, a very low negative premium has adversely affected the market. Unlike the declines of the past two years, this one has been largely spot led, rather than clearing the overleveraged contract market.

According to BlockBeats, almost all the Bitcoin contracts on the mainstream trading platforms, including Bitmex, CME, Binance, Huobi and OKEx, involve the collection of Coinbase prices.

To see if there is any correlation between Coinbase's fall in bitcoin, RulyBlockBeats created a bitcoin spread chart between Binance and Coinbase.

The K-plot of Binance and Coinbase Bitcoin Price Difference shows the red line as the zero axis and the blue line as the price movement of Bitcoin. When the spread is greater than zero, Coinbase has a negative premium

As you can see from the chart above, Coinbase's bitcoin has been trading at a negative premium since the early hours of January 11, when the price of bitcoin dropped from $38,000 to $32,500. Coinbase's lowest negative premium occurred at 4am Beijing time on January 11, with a negative premium of more than $1,000. This proves that there are investors selling bitcoin through Coinbase, regardless of the cost. When Bitcoin started to rally, the negative Coinbase premium was wiped out and started to be positive.

At 22:00 on January 11, when Bitcoin fell to around $31,000, Coinbase's massive negative premium occurred again, along with the outage of the Coinbase platform.

It is not the first time that there has been a huge price gap between Coinbase and the mainstream trading platform. A similar event happened in October 2018, but at that time, the main reason was that USDT violent lightning caused the price of bitcoin on the trading platform denominated in USDT to rise. Therefore, there will be a price gap between Coinbase denominated in USD, and the attributes are not consistent with this huge price gap.

The price difference between Binance and Coinbase

There is no direct evidence that Coinbase is manipulating the market, and a large negative premium could be interpreted as a whale selling through the platform. However, the failure to generate new buying due to the platform's problems raises the question of whether Coinbase is manipulating the market by taking advantage of its platform manager.

Vijay Boyapati, a software developer, tweeted that it was the perfect time for Coinbase to launch an IPO. Coinbase's IPO will be a catalyst for the market, driving stock market money into Bitcoin, and Wall Street and retail investors will be swindled by the profits of the bull market. But they don't understand the cyclical nature of crypto assets, where trading platforms make most of their profits during bull markets and suffer long recessions after them.

The crypto giant, which is expected to be valued at $50 billion after its initial public offering, is being scrutinized by the capital markets. Could the increasing number of outages affect Coinbase's chances of going public?

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