In light of the regulatory takeover’ by the SEC and other authorities in the United States, Coinbase (NASDAQ: COIN), a publicly traded cryptocurrency exchange, has been advocating for the crypto sector and investors to band together.
Coinbase’s shorting of crypto assets using derivatives financial techniques is an interesting development, as shown by the company’s quarterly public filings obtained by Finbold and provided to the SEC and investors.
Shorts can be made in two ways: (A) by borrowing cryptocurrencies using other assets as collateral, then selling them on the spot market with the expectation of buying them back at a lower price, repaying the loan, and profiting with the difference, receiving the collateral back; or (B) by opening short positions using futures contracts, with executable orders that profit when the price goes lower than what is trading on the spot.
According to its Q2 2023 report, Coinbase has the following potential short positions worth $300.15 million as of December 31, 2022: On December 31, 2022, the corporation had $13.10 million in collateral deposits, and on June 30, 2023, it had $23.08 million.
On August 16, this tweet was sent by an account named Rho Rider on Twitter (X): “Have fun being fronted and run by their ‘Risk Solutions’ department, and I wonder how many of the folks celebrating COIN crypto futures realise that COIN exposes they’ve been shorting the market through crypto futures for years in their financial reports.”
In light of the recent announcement that Coinbase will begin offering cryptocurrency futures, some have voiced concerns that the exchange would “front run” investors by taking advantage of its position as a distributor of futures contracts to boost its own profits.
Also Read: Over $1 billion in crypto market liquidation as Bitcoin reaches a two-month low
