A year ago, the cryptocurrency industry was on the rise, and only Coinbase Global Inc., which went public on the stock exchange. was estimated at $85 billion. Since then, there have been many events that have led the digital asset market into a precarious position. As for Coinbase, which operates the crypto exchange of the same name, investors began to doubt the company's ability to survive in this situation.

Coinbase is a public company whose shares are traded on an exchange. It looks like it has managed to avoid the turmoil after the recent collapse of its rival crypto exchange FTX. However, Coinbase's capitalization has been steadily declining along with investor confidence. Since the beginning of the year, the company's share price has decreased by 81%, and its market capitalization has decreased to $11 billion.

This drop raises questions about the future of digital currencies and related companies. In September 2021, Coinbase unsecured bonds with a rate of 3.375% maturing in 2028 were trading at $0.57 per dollar this week. Analysts say one interpretation of this fact is that investors consider it roughly settled whether Coinbase will pay off its debt in full or lose so much money that bondholders will suffer large losses as a result of the bankruptcy of the company. Company officials declined to comment on the matter.

Over the course of Coinbase's existence, there has been a perception in the industry that the company is running a relatively transparent business based on taking a small share of the transactions made on its platform. It is difficult for many to imagine the cryptocurrency industry without Coinbase, but it is becoming more difficult to believe that the future of the digital asset market will become as prosperous as the past. Interest rates are rising, the value of cryptocurrencies has hit multi-year lows, and clients of bankrupt players like FTX are wondering if they can get their money back.

Even in this challenging environment, Coinbase's share price reflects the likelihood that the company will be able to become highly profitable in the future, which could be a success for investors and business owners. At the same time, for investors in debt obligations, the only thing that matters is that the company is able to pay interest and principal on the debt. Coinbase bonds maturing in 2028 traded at 14.6% this week, up 10.7 percentage points from comparable US Treasury bonds.

According to some investors and analysts, Coinbase's cash flow is one reason why the company has time to prove its worth. As of September 30, the company had $5 billion in cash and cash equivalents at its disposal, largely due to Coinbase's success in recent years. The company's principal debt, unless it is converted into shares, is due to be issued a $1.4 billion convertible bond maturing in 2026. $2 billion in unsecured bonds maturing in 2028 and 2031 effectively make up the company's entire remaining debt burden.

The big question, however, is the sustainability of Coinbase's business. Coinbase lost $278 million last quarter, even though the company was able to save $391 million in costs by paying employees in stock. Bond investors say Coinbase can easily cut costs in non-fungible NFTs, for example. It is also good news for them that the company has begun to cut staff.

Ultimately, Coinbase's business is highly dependent on the value of cryptocurrencies in general and Bitcoin in particular. This is due to the fact that bitcoin makes up more than 40% of the cryptocurrency assets of the company's clients. The platform charges a 1% commission on private investor trades and offers a much lower rate for institutional investors. This means that as bitcoin depreciates, the company's revenue also falls. In addition, as the exchange rate declines, the volume of trading may also decrease, which will cause an additional blow to the business.

There are other risks as well. The US Securities and Exchange Commission has long argued that many cryptocurrency tokens should be considered securities. If the regulator approves this rule, then, according to analysts, Coinbase will have to freeze trading in tokens, which make up at least 30% of the company's clients' crypto assets.