Coinbase Sells Substantial Ether Holdings
Coinbase, a prominent player in the cryptocurrency exchange market, sold a noteworthy 12,652 ether (ETH), equivalent to approximately $25 million at current prices, during the fourth quarter of the year. This information comes from Geoffrey Kendrick, the global head of digital assets research at Standard Chartered Bank, who recently analyzed Coinbase’s quarterly filings.
Understanding Coinbase’s Ether Holdings
In his analysis, Kendrick highlighted that Coinbase categorizes its ether holdings for various purposes, including investment and operational needs. He further estimated that around 80% of the revenue generated by Base, Coinbase’s Ethereum layer-2 blockchain, translates into profit. This indicates a strategic approach to managing their assets and revenue streams.
Market Timing and Trading Patterns
Kendrick pointed out an interesting correlation between the timing of Coinbase’s trades and price movements in the cryptocurrency market. In the third quarter, when ETH was trading at approximately $2,500, Coinbase net bought ether. Conversely, in the fourth quarter, when the price surged to around $4,000, the exchange opted to net sell. Currently, ETH is valued at around $2,000.
“The fact that they net bought in Q3 (when prices were low on average) and net sold in Q4 (higher average prices) tells me Coinbase acts like any risk-adjusting profit maximizer would do,” Kendrick commented.
Operational Needs and Ether Sales
Coinbase acknowledged that it sold some of its ether holdings to support operational expenses, although the company did not specify the exact amount involved. A spokesperson for Coinbase clarified, “Base earns ETH from sequencer fees, and the ETH we earn is primarily held for long-term investment or used for operational expenses, including tax liabilities, salaries, grants, acquisitions, and funding public goods.”
Strategic Selling vs. Accumulation
Kendrick’s calculations reveal that over the past three quarters, Coinbase has engaged in net ETH sales totaling 1,558, indicating a pattern of strategic selling rather than accumulation. This conclusion was drawn by subtracting Base’s profits in ETH from the changes in Coinbase’s overall ETH holdings.
Clarifications on Trading Practices
In response to questions about their trading activities, the Coinbase spokesperson reiterated that the company typically does not engage in regular trading of cryptocurrency assets. “As shared in our 10K: ‘Crypto assets held for investment are primarily held long-term… we do not engage in regular trading of these assets but may lend them through Prime Financing or stake them.’ Our ETH held for investment grew by 20% over the course of 2024,” the spokesperson added.
Addressing Speculation on Ether Sales
This is not the first time Coinbase has faced scrutiny regarding its ether sales. Recently, a representative from Base addressed speculation about potential ETH sales, emphasizing that the exchange has “accumulated over $300 million in ETH, which is more than double all of Base’s ETH earnings over time.” This statement highlights Coinbase’s commitment to maintaining a robust and sustainable ether reserve despite market fluctuations.
In summary, Coinbase’s strategic sales of ether, coupled with its operational needs and investment strategies, demonstrate a calculated approach in navigating the volatile cryptocurrency market.
