Coinbase Prepares For Crypto Winter With $4B War Chest Of Cash Reserves

What Happened: Major U.S. crypto exchange Coinbase Global Inc COIN has stockpiled $4 billion in cash in preparation for a period of extended business risks.

“We want to ensure that we maintain those cash reserves so that we can continue to invest and continue to grow our products and services in the event that we go into a crypto winter,” said Coinbase’s Chief Financial Officer Alesia Haas to the Wall Street Journal.

Haas claims that the crypto exchange even stress-tests its balance sheet to ensure it has adequate funds to prepare for a stricter regulatory regime, possible cyberattacks, potential trading declines, and even unknown risks that are yet to be identified.

Why It Matters: Coinbase boasted strong financial results during the second quarter of 2021, which likely helped grow its cash reserves to its current value of $4.3 billion.

During the second quarter, the exchange also reported a net income of $1.6 billion - a figure that increased by 4900% from the $32 million recorded in Q2 2020.

Haas noted that 95% of Coinbase’s revenue comes from trading fees, meaning that price volatility in crypto markets came as a boon to the company’s trading business.

Read also: Galaxy Digital Files For US Bitcoin Futures ETF After Reporting $175M Loss In Q2

The CFO also noted that the addition of new crypto assets, like Dogecoin DOGE/USD in June significantly boosted the company’s revenue.

“This is literally a cash machine,” commented Wedbush Securities analyst Moshe Katri, stating that the company’s results show how it can generate cash from operations.

However, Coinbase has no plans to return capital to shareholders by buying back shares or paying dividends, according to Haas.

Instead, the crypto exchange will save its cash on hand for the right investment opportunity or serve as a buffer against a period of low trading activity.

Price Action: Coinbase shares were trading 0.82% at $249.38 at press time.