Is Coinbase Effect Dead? Crypto Assets Show Minimal Movement After Listing

Avatar Samuel Wan 3 months ago

In a continuation of good news for crypto asset Stellar, Coinbase recently announced the listing of XLM on its platform. Markets reacted positively to the news, with a 4% increase against the Dollar, but similar to XRP’s recent listing on the platform; investors were left feeling somewhat disappointed.

Is this further confirmation of Coinbase’s diminishing influence? Or, were past pumps the result of market manipulation?

Coinbase Making All The Right Moves

2018 proved to be an outstanding year for Coinbase. For instance, rumors of an imminent IPO circulated when they announced a successful round of investment fundraising to the tune of $300 million – which puts a valuation of $8 billion on the company. They said the money would be spent on building out fiat to crypto infrastructure. But were quick to quash suggestions of a public offering by saying:

“we would always remain a crypto-first company.”

Coinbase Ventures, their investment division, also invested in several startups last year. This move brought Nomics, Securitize, Starkware, and Abacus on board, adding data and API specialism to their portfolio. But perhaps most significant was their collaboration with technology company Circle to develop the USDC stablecoin. USDC has since made great strides in a short amount of time. Circle CEO, Jeremy Allaire celebrated its achievements at the end of last year by signaling his ambition to overtake Tether. And with leading exchanges including Bitfinex, KuCoin, Binance, Poloniex, and Korbit listing the coin, 2019 holds great promise.

Retail Investors Not Forgotten

Aside from the corporate goings-on, retail investors can now make instant withdrawals to PayPal. Also, with the introduction of Coinbase Earn, users get rewarded for learning about crypto. This move recognizes that lack of knowledge is a significant barrier to crypto uptake. Coinbase Earn addresses this by incentivizing users.  They say:

“The idea is for users to understand more about an asset’s utility and its underlying technology, while getting a bit of the asset to try out.”

At the same time, the expansion of their product offering has seen the addition of BAT, BSV, CVC, DAI, DNT, ETC, GNT, LOOM, MANA, MKR, XLM, XRP, USDC, ZEC, ZIL, ZRX to the lineup. With an on-going assessment to add more. Coinbase has publicized its plans to eventually incorporate almost all assets that meet its criteria for security, compliance, and vision. This brings welcome news to users, who were previously frustrated by the lack of choice on offer. In a statement, they said:

Over time, we intend to offer our customers access to greater than 90% of all compliant digital assets by market cap.”

Furthermore, Coinbase, which is already available in 33 countries, has rolled out support for six new European jurisdictions. Those being Andorra, Gibraltar, Guernsey, Iceland, Isle of Man, and Lithuania. However, users in those countries do not have access to Pro functions at present. Nonetheless, this indicates a serious intent to broaden its global presence and become a more influential player.

Coinbase Remains Influential But Not on Price

While the crypto landscape has changed dramatically since the start of the bear market, for example in a much-reduced market cap, Coinbase remains at the forefront of development from both an institutional and retail perspective. But, as seen with the recent listing of XRP and XLM, this no longer translates into a surging token price.

For one thing, many people still cling to the simplistic notion of a positive correlation between price and availability. However, in the present, there now exists multiple confounding factors that skew this relationship. For example, those remaining in a bear market tend to be knowledgeable and support the fundamentals of what crypto is trying to achieve. Whereas back in May 2017, when Coinbase listed Litecoin, triggering a 40% spike in price against Bitcoin, not only did fewer exchanges exist, but the average investor was merely out to make quick money in what seemed like a frenzied free-for-all. In short, the hit and run investors have gone. While unfortunate for liquidity and volume, Yaniv Feldman of One Alpha sees this as necessary for long term prosperity:

“The December 2017 and January 2018 boom and bust had a cleansing effect on the ecosystem, removing many of the speculators and leaving mainly real investors, operators, and builders in the market. This is what was necessary to move forward and build a successful ecosystem.”

What Does Coinbase Bring to the Table?

During tough times, investors are wary of where to spend their money for fear of losing it entirely. In which case, those with money to spend do so on the basis of strong fundamentals and long-term viability. This point gets further compounded in a bear market, which has already seen some well-regarded projects, such as NEM and ETC, disclose funding problems. In an interview, Igor Artamonov of ETCDEV echoes this view:

“There are a few things that happened at the same time. I am sure if that happened a year ago, that wouldn’t be a problem at all, a year ago there was a lot of free money in the market. But in a bear market there’s a change.”

With that in mind, investors know that listing on Coinbase brings nothing to the fundamental value of that project. And given the prevailing market conditions, a sustained surging price cannot be expected in the short-term. Instead, Katie Talati of Arca sees the benefits occurring in the future:

The long-term value of broad retail exposure offered by a Coinbase listing is something that may be felt over the course of many years, not from a quick flip during a two week period.”

Market Manipulation

On a more unsavory note, accusations of insider trading and market manipulation plague the industry. A study by John Griffin of the University of Texas claims that much of Bitcoin’s epic price rise at the end of 2017 was due to manipulation. He examined millions of transactions on Bitfinex and noted that Tether was used to buy Bitcoin at critical moments. This helped to stabilize the price when the market was heading for a fall. Griffin said:

“It was creating price support for Bitcoin, and over the period that we examined, had huge price effects. Our research would indicate that there are sophisticated people harnessing investor interest for their benefit.”

Coinbase is no stranger to complaints of manipulation. Numerous claims have been filed against the exchange, with the most recent case focusing, once again, on employees profiting from the recent XRP listing. With that in mind, it’s conceivable that past Coinbase listings were also subject to massive manipulation by “sophisticated people.” And what we see in the present, a diminishing Coinbase effect, is indeed how markets react when the “sophisticated people” have left

.

Diminishing Coinbase Effect

Coinbase runs an impressive operation, and by all accounts will continue to grow. But investors should no longer expect surging prices following a listing on their platform. The market conditions do not support this, whether that is because the golden era has passed, or as a result of high-level market manipulators departing or even a combination of factors is up for debate.

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