Coinbase’s Quintuple Listing Quandary, and What to Make of It
There are few exchanges more widely recognized or universally trusted than Coinbase, which has served an ever-growing number of cryptocurrency traders and investors for the last 5 years. Present nearly since the beginning of the Bitcoin craze,
Coinbase is a significant influencer in the market. For all its influence, however, the exchange has curiously refused to list any new cryptocurrencies. Unlike competitors which boast hundreds of assets on their platforms, Coinbase has stuck with the “original three” of Bitcoin, Litecoin, and Ethereum for most of its existence.
The reason for its refusal to expand (in terms of listings, anyway) is probably caution. Coinbase has an excellent relationship with regulators aided by its long list of VC backers and institutional investors. Despite the prospect of adding customers and volume to their platform alongside new coins, it’s a better idea to err on the side of safety and ensure everything is by the book. “The book” in this case is an ambiguous and constantly changing array of regulations. To an exchange with an ambition for longevity, it’s more important to solidify its place in an uncertain future rather than make an ill-judged cash grab. Coinbase may not want to get ahead of itself, only to encounter rough regulatory seas and be forced to halt registration and new listings, much like Bittrex and Binance did earlier this year.
To this end, the recent announcement on Coinbase’s blog about their intent to add five new cryptocurrencies to their platform—Cardano, Stellar Lumens, Basic Attention Token, Zcash, and 0x—was quite out of character. Some believe that it could be a positive and pivotal point in an enduring bear market; others opine that Coinbase is up to something sinister (given a somewhat shaky track record in this regard); and the rest don’t know what to think. As is always true in cryptocurrency, context is helpful.
What Could Coinbase Be Up To?
Those who believe that Coinbase is up to something shady have a few instances of past malfeasance to draw from but primarily, the bungled addition of Bitcoin Cash to the exchange in late 2017. Last year, Coinbase added Bitcoin Cash to its platform with no prior announcement, save for the accidental inclusion of BCH in their API. One minute it was business as usual, and the next, investors were introduced to the first new asset on the platform in years—and during a raging bull market, no less.
Bitcoin Cash’s price was pumped so quickly by traders that it inflated to a value of $9,500, though in reality it had simply overwhelmed Coinbase’s systems and reached around $3,400, a not-too-shabby increase of 64% in a single day. The community was outraged that their trusted exchange had seemingly manipulated the market in such a manner (and probably that they missed out on predictable returns), and Coinbase itself opened an insider trading probe into its own employees. Even though the intentional forewarning of the latest announcement contrasts with the Bitcoin Cash fiasco, especially suspicious cryptocurrency enthusiasts believe Coinbase will intentionally list these coins at the most opportune moment for itself. There’s nothing to indicate otherwise, save for Coinbase’s word.
Others see the announcement as great news for the cryptocurrency market. If an exchange as cozy with regulators as Coinbase is ready to begin including lower market capitalization currencies, it indicates that the wider financial sector may be more favourable to cryptocurrency in general. This is demonstrated in the extreme caution that Coinbase exercises when considering changes to its platform, which must take a changing regulatory rule book into account but also compatibility with its existing offerings. The SEC must recognize any new assets (as it recently did with Bitcoin and Ethereum), but they must also comply with Coinbase’s Digital Asset Framework. The DAF is frequently pointed to by Coinbase evangelists as incontrovertible proof of their good intentions, as it takes an enormous number of criteria into account when determining which assets to list, with an overall goal of creating a healthy and sustainable cryptocurrency ecosystem.
The dubious crowd can see both sides of the issue, but which side of the fence they’ll eventually fall on will probably be influenced by whatever happens with Ethereum Classic. After announcing in June that the “coming months” would see ETC on Coinbase, all eyes are on the rollout and assumed launch of ETH Classic—it being the first new asset added since Bitcoin Cash. If the listing is delayed, suffers problems, or is cancelled (not out of the question), skeptics will probably highlight the ambiguous language in Coinbase’s recent five-coin announcement.
“Unlike the ongoing process of adding Ethereum Classic, which is technically very similar to Ethereum, these assets will require additional exploratory work and we cannot guarantee they will be listed for trading. Furthermore, our listing process may result in some of these assets being listed solely for customers to buy and sell, without the ability to send or receive using a local wallet. We may also only enable certain ways to interact with these assets through our site, such as supporting only deposits and withdrawals from transparent Zcash addresses. Finally, some of these assets may be offered in other jurisdictions prior to being listed in the US.”
That’s a significant amount of uncertainty.
Forget the Guessing Game and Focus on Price
Regardless of whether the coins will eventually hit Coinbase, we can see some indication of what will happen to these coins based on Bitcoin Cash after it overcame the initial hurdles. After its invalid moonshot, BCH quickly fell in lockstep with the other currencies listed on the platform. New exchange listings is more of a “buy the rumor, sell the news” trade, which is evidenced by the 25% spike in ETC after its Coinbase announcement. The exact same thing happened to each of the five cryptocurrencies after the latest statement.
What happens to them when (or if) they’re listed will be attributed to their individual successes as blockchain projects. There’s no doubt that any of the five for potential addition to Coinbase are ahead of the curve, and to an impressive degree. BAT, for example, is enjoying an influx of interest about its Brave browser that helped them reach 3 million monthly active users in July. The rest are no exception, and savvy enthusiasts aren’t letting Coinbase’s pseudo-announcement-cum-rumor affect their determination to invest in the cryptocurrency market’s most promising companies, anyway.