Coinbase released Q2 results and also launched the Base blockchain. PayPal entered the stablecoin market. Sam Bankman-Fried, the founder of the FTX exchange, was jailed after violating a judge’s order. Social media influencer Richard Heart was charged by the SEC.
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Coinbase’s Q2 results
US-based Coinbase is the only crypt exchange publicly listed on the US stock exchange (Nasdaq). As a result, we receive quarterly reports on Coinbase’s financial status. These quarterly reports provide useful insights into the entire crypto market.
Coinbase released its Q2 2023 report earlier this month. You can read the investor’s letter by clicking this link.
Coinbase’s result slightly beat the consensus, but there was a lot of variation in investor expectations. The company lost about 100 million dollars in the second quarter. It’s a major improvement compared to the billion-dollar loss Coinbase experienced last year.
The American crypto exchange has been able to cut its costs by half compared to a year ago. In addition, the interest income has grown to more than 200 million dollars, which is a significant change from the previous years.
Are Coinbase’s numbers showing any signs of crypto investors waking up? Unfortunately, no. Trading volumes of cryptocurrencies continue to decrease on the consumer and institutional sides. Cryptos were traded on Coinbase by 36% less than in the previous quarter.
Based on the data presented in the table above, it is evident that Bitcoin’s share of transaction revenue is rising. This is unsurprising, as the investment climate is still very much risk-off. Memecoins and other high-risk cryptos are not attractive to investors. This will hardly change during Q3.
Coinbase’s stock (COIN) is at around $75, up 100% since the start of the year. At its best, COIN would be worth more than a hundred dollars in mid-July. The previous four weeks have seen a steady decline.
It seems that Coinbase’s spending cuts have been effective, and the company has gotten into a good situation considering the general state of the market. Coinbase has about $5.5 billion in cash, so losing a hundred million every quarter is not a problem.
If Coinbase clears its regulatory challenges (Coinbase vs. SEC), it will return to a strong growth path in the coming years. Still, it’s not worth expecting a significant excess return from the stock compared to the crypto market.
Coinbase launched the Base blockchain
Let’s continue with news related to Coinbase because the American exchange made a significant launch two weeks ago. Coinbase released its own Ethereum Layer 2 solution called Base. Base was officially launched on August 9.
Base is open and Onchain Summer is here 🟡
Become a part of Base history by minting “Base Day One” to join the story of bringing the world onchain
— Base 🛡️ (@BuildOnBase) August 9, 2023
Ethereum’s Layer 2 solutions are perhaps the hottest sector of the crypto industry. A lot is happening around Ethereum, and the blockchain suffering from technical limitations is being scaled with Layer 2 solutions.
The most popular L2s on the market are Arbitrum and Optimism, which differ slightly technically. Base is built using Optimism’s OP Stack architecture. Because of this, Coinbase didn’t need to reinvent the wheel and the company was able to launch a Layer 2 quickly.
This week, a more extensive Base guide has also been published on our website. Check out that article if the topic interests you more.
Base’s strength is the direct link to the Coinbase exchange and its 100 million customers. Base also opens an easy way for institutions to access DeFi. A direct transfer from Coinbase -> Base is not yet possible, so the coins must be transferred from the Ethereum blockchain to the Base blockchain via a separate token bridge.
Base has gained significant popularity already. Below is an image from the Defillama website of the largest DeFi platforms on the market.
Base has risen from nothing to number 12 and has already raised $187 million in liquidity for various DeFi apps. Base will probably be firmly in the top ten in a month.
The well-known DeFi protocols, e.g. Uniswap, Compound, and Sushiswap, can already be found on the Base platform. Lately, the friend.tech app, a unique social marketplace, has received significant attention.
Base differs from other smart contract platforms because it does not have its native token. Transaction fees are paid on the Base platform with Ether (ETH). This is also the case with other Layer 2 solutions. The competing Layer 2s (Arbitrum & Optimism) have launched tokens, which are government tokens.
Currently, the only way for an investor to benefit from Base’s growth is to buy Coinbase stock. Base can be a significant source of income for Coinbase in the future through its transaction fees.
PayPal launches a stablecoin
One of the biggest news in August is related to the payment service PayPal, which announced two weeks ago that it would launch a stablecoin. PayPal’s stablecoin is officially called PayPal USD, using the ticker PYUSD.
PayPal launches the stablecoin with Paxos, a well-known American company. Paxos has already launched a stablecoin and manages the Binance USD stablecoin, which was attacked by the SEC earlier this year.
Today, we’re unveiling a new stablecoin, PayPal USD (PYUSD). It’s designed for payments and is backed by highly liquid and secure assets. Starting today and rolling out in the next few weeks, you’ll be able to buy, sell, hold and transfer PYUSD. Learn more https://t.co/53RRBhmNHx pic.twitter.com/53ur2KmjU7
— PayPal (@PayPal) August 7, 2023
PYUSD will be launched on the Ethereum blockchain. In the future, it will probably expand to at least Ethereum’s Layer 2 solutions. PYUSD uses US dollars and US government bonds as collateral, like other USD-backed stablecoins.
Read more about stablecoins from our in-depth beginner’s guide: what is a stablecoin?
PayPal has talked about its stablecoin plans before. However, the company put the development work on hold at the beginning of 2023 due to US regulation (i.e., the lack of it). Now the situation has changed for the better.
The decision was certainly influenced by financial reasons as well. The stablecoin business is printing money due to high interest rates on US government bonds. Stablecoin issuers can invest much of the collateral in US government bonds and make huge money from the interest income.
The news is also significant for the entire crypto sector. PayPal is one of the world’s leading payment services. If a company of this size enters the crypto sector with its product, it also opens the way for smaller companies. It brings legitimacy to the entire industry, especially in the eyes of institutions.
PYUSD is initially available to US users. PYUSD becomes a regulated stablecoin alternative for investors alongside USD Coin, DAI, and Tether. You should consider diversifying into different options if you keep significant assets in stablecoins.
It would not be surprising if PayPal brought a euro-based stablecoin to the European market next year.
Sam Bankman-Fried went to jail
A year ago, Sam Bankman-Fried was one of the most famous people in the crypto sector, and he also ran the market’s fastest-growing exchange (FTX). However, in November 2022, everything changed when his empire collapsed in a matter of days. Behind the scenes, one of the biggest scams in the history of the financial industry was revealed.
SBF was transferred to the United States shortly after the FTX crash, where he was granted pretrial release on $250 million bail. Bankman-Fried has spent most of 2023 at his parent’s house, waiting for the trial that starts in October.
If you want a good summary of the events of the previous 10 months, check out the Coin Bureau channel video below.
Sam Bankman-Fried has not spent 2023 playing Playstation because the man has had time to break the court’s orders several times. He has contacted his former colleagues despite the prohibitions, used a VPN connection, etc.
However, SBF went too far when he decided to leak business partner Caroline Ellison’s diary to the New York Times. Ellison was the CEO of Alameda Research, which was closely connected to the FTX exchange, and she is probably one of the biggest culprits in the FTX disaster.
Due to his violations, the former golden boy of crypto is now awaiting an upcoming trial in jail. The situation does not look good for SBF because the charges are extensive and serious. In addition, the previous colleagues will testify against Bankman-Fried to get a smaller sentence.
The famous Bernie Madoff was sentenced to 150 years in prison after running tens of billions of dollars Ponzi scam on Wall Street. Time will tell how many zeros are found in the SBF verdict. The man will probably be in prison for a very long time.
Richard Heart was charged by the SEC
Richard Heart is one of the best-known characters in the crypto industry. Heart has been influencing the industry for almost ten years, and every active social media user has come across the man’s tweets and interviews in recent years.
Heart’s popularity exploded when he launched the much-debated HEX cryptocurrency. A couple of months ago, Heart also launched PulseChain, which has been in the works for years. PulseChain is an Ethereum clone.
Richard Heart has built himself a personality that arouses buzz and discussion. He has constantly posted pictures of expensive clothes, cars, watches, and publicly bragged about his assets. The purpose is to get attention for Heart’s crypto projects. Now all these Tweets have been deleted for some reason…
The documentary “The Highest Of Stakes” has also been published about Richard Heart and the HEX cryptocurrency. If you are unfamiliar with Heart, this trailer gives a good picture of the man’s activities.
The year 2023 has seen countless SEC attacks on companies, individuals, and crypto projects. Now the US regulator has also targeted Richard Heart. The SEC accuses Heart of an illegal securities offering that raised over $1 billion. SEC is attacking is the previously mentioned projects HEX and PulseChain and the decentralized exchange PulseX.
According to the SEC, Heart has also used investors’ money to purchase luxury products and made promises to HEX investors of potential profit.
The SEC released a statement about the charges against Heart on the last day of July. No further information has been seen on the subject since then. Heart is known to be a wealthy man, so he must have significant legal resources. It wouldn’t surprise if Heart would fight this case in court. However, the most likely option is heavy fines and settling the case.
In addition to Heart, many well-known HEX promoters have received charges from the SEC in 2023.
The price of HEX has fallen by more than 50 percent after the news. HEX is now more than 99 percent below its ATH price, i.e., it has become practically worthless. The coin is not listed on any major crypto exchange. PulseChain’s native token, PLS, has dropped more than 50 percent after the SEC challenge. PLS is currently more than 86% below its ATH price.