I saw a note on Friday that Coinbase Pro is shutting down, with all users are being forced to migrate to the regular Coinbase interface. I also saw a note from Coinbase for their Dutch customers that starting on June 27 whenever sending crypto outside of Coinbase they are required to ask you for the name and physical address of the recipient as well as the purpose of the transfer. And then a lot of tweets about this being the end of Coinbase. I don’t think so.
Coinbase started with a simple interface for beginning crypto users in 2012. In 2015 they created a more professional trading platform called GDAX that was renamed in 2018 to Coinbase Pro. Now they are allowing regular Coinbase users the Pro type features and no longer want to retain two different interfaces. I have been taking advantage of cheaper prices on Coinbase Pro for some time, and like many others have both Coinbase and Coinbase Pro accounts. We don’t have all the details yet on exactly the advanced trading features that will be available, the fee structure and timing. My take is there is no cause for alarm, but if you do trade here, keep an eye on the fees and consider switching if they no longer meet your needs. Overall, long term it is better for Coinbase and if they don’t make mistakes during the transition, better for most of us customers too. If you are a Coinbase customer, read their blog entry on this and don’t panic.
Along the same lines, no need to panic about the requirement on the Dutch side about requiring destination information for transfers off of Coinbase. Coinbase is an industry that is having more regulations imposed and they must comply with the national laws of where they operate. if you have an account with Coinbase (or other financial institution) and you live in a particular geographic area that passes new legislation you should not be surprised that they will try to comply with that law. There are things you can do and you should consider them to protect yourself in advance – I talk about that right after Celsius.
Unlike Coinbase, if you have funds at Celsius, it might really be the end. Celsius (a centralized crypto lender) froze withdrawals and transfers on their platform due to ‘extreme market conditions’. There are also significant concerns about the DeFi protocol AAVE, and venture capital fund Three Arrows Capital (3AC). 3AC was served with a notice of default by Voyager Digital for not making required payments on loans of over 15 thousand BTC and $350 million in USDC. Yesterday, Voyager said it has reduced the amount its customers can withdraw and has accessed a revolving credit line. The Harmony (ONE) team was hacked for about 100 million dollars. Hopefully you still recall the Terra / Luna debacle where their ‘stable’ coin UST lots 97% of its value.
The risk we’ve seen recently is not with Bitcoin (or other base layer cryptos – Ethereum, Monero, BNB, etc.) but with the DeFi and cross chain solutions built on top. Especially in places where leverage / margin are employed to boost the returns. And be very aware, if Bitcoin drops below $18,000 the next round of folks who don’t have enough collateral and get margin calls or forced liquidation will get hit, possibly dropping things further. Contagion is very possible. All of these cases reinforce what I’ve said before – be aware of the risks when you invest in crypto in general and DeFi in particular. There is no FDIC insurance, and no easy class action lawsuits to get your money back. DYOR – Do Your Own Research and if you have more risk than you like, consider taking your losses and getting out now.
How should you protect yourself? First of all remember TANSTAAFL (There Ain’t No Such Thing As A Free Lunch). If the returns offered seem too good to be true, they probably are. Make sure you understand whatever you invest in, and the risks you may face. When possible, self-custody your crypto because NYKNYC (Not Your Keys Not Your Coins). If you are trusting someone else to custody your coins, make sure you have enough justification for that trust, and think through in advance your exit strategy – if you don’t need it, it costs you little, but if you have it and need it, it could save you quite a bit.
Now is a good time to deepen your knowledge. If you haven’t started yet, get some Bitcoin and learn how to hold it and spend it. If you have some, learn more. I suggest you start with ways to protect your crypto with self-custody, hardware wallets and multi-signature. Also look into the lightning network and ways that you can get paid in Bitcoin and pay others in it too… If you believe in the long term potential of crypto you should consider Dollar Cost Averaging (DCA) to increase your position now while the price is much lower than 12 months ago. I continue to use Strike to get my paycheck paid in Bitcoin. If you want to do this, you can use my referral code (J7FBQK), and we both get a small bonus. If you need help with either investing or using crypto, please reach out – that’s what I do.
Last week I was the guest speaker for a meeting of the Pennsylvania Society for Tax and Accounting Professionals (PSTAP). It was a fast paced presentation with a lot of interaction covering basics of crypto and key tax situations to be aware of. If you want to take a course from me and don’t want / need my normal one-on-one attention, I am teaching 3 more sections of my Introductory course at the local community college. It’s only $139 for a four hour course – in person in Schnecksville, PA on August 20, and remote (via Zoom) in the evenings – August 25-Sep1 and September 20-27. For more information or to register for any of those, call 610-799-1197 (press 3 for non-credit courses) and someone will be help you get registered. Any questions or concerns do email me or call me and I’ll help you out.
As always, thank you for taking the time to read my email. Please let me know what’s most helpful for you and if there are any topics you’d like me to cover. This email is strictly for your education and entertainment, I don’t offer financial, legal or tax advice. You need to evaluate your own situation and risk tolerance and DYOR (Do Your Own Research). Do not put any money into crypto that you are not willing to lose. I love answering crypto questions, so please do email me or call me, I like to help. Personal instruction and assistance is my specialty – so if you or anyone you know is looking for more than an email response to a question I can also provide one on one consulting and have a number of classes / consulting packages.