Bitcoin falls. Is Coinbase manipulating the Bitcoin market due to its downtime?

On the evening of January 11th, Beijing time, the trading system of Coinbase, one of the world's largest compliant crypto asset trading platforms, had problems. A large number of users said that Coinbase's web and mobile terminals were unable to perform operations including trading and withdrawals. Subsequently, Coinbase officials discovered the problem and began investigating the issue at 22:46 Beijing time on January 11th.

It was not until 2:39 am Beijing time on January 12 that Coinbase completed the fix for the problem, which lasted more than 4 hours.

This outage is believed to be the main cause of the market crash.

The price difference of Bitcoin between Coinbase and other major platforms

According to Coinbase Support’s official description of the problem, there will be delays when users trade, especially when users make buy transactions.

In other words, there was almost no new buying on Coinbase at the time.

This also led to a huge price difference between Bitcoin on Coinbase and other mainstream trading platforms. BlockBeats found that the price difference between Bitcoin on Coinbase Pro and Huobi was once $1,000. Some Twitter users also found that, calculated in euros, the price difference between Bitcoin on Coinbase and other mainstream trading platforms once exceeded 3,000 euros.

Is Coinbase manipulating the market?

According to cryptocurrency analyst Willy Woo, the main reason for this round of Bitcoin decline may be the Coinbase outage. When the price of Bitcoin fell back from $41,000 to $38,000, Coinbase malfunctioned and could not perform buying operations, resulting in a negative premium of up to $350 for Bitcoin on the Coinbase platform. Since many Bitcoin futures contracts use Coinbase's price as a data source for Bitcoin indices, the low negative premium has an adverse impact on the market. Unlike the declines in the past two years, this round of Bitcoin declines was mainly led by spot rather than liquidation of over-leveraged contract markets.

According to BlockBeats's query, almost all Bitcoin contracts on mainstream trading platforms, including BitMEX, CME, Binance, Huobi, OKEx and other platforms, involve the collection of Coinbase prices.

To study whether the decline of Bitcoin is related to Coinbase, BlockBeats created a Bitcoin price difference chart between Binance and Coinbase.

Binance and Coinbase Bitcoin price difference candlestick chart, the red line is the zero axis, the blue line is the Bitcoin price trend; when the price difference is greater than zero, Coinbase is a negative premium

As can be seen from the above figure, from the early morning of January 11, Coinbase's Bitcoin began to show a negative premium, and then the price of Bitcoin fell from $38,000 to $32,500. The lowest negative premium of Coinbase occurred at 4 a.m. Beijing time on January 11, with a negative premium of more than $1,000. This proves that some investors are selling Bitcoin through Coinbase regardless of the cost. When Bitcoin began to rise, the negative premium of Coinbase was wiped out and began to show a positive premium.

At 22:00 on January 11, when Bitcoin fell to around $31,000, Coinbase experienced a large negative premium again, and the Coinbase platform also crashed at the same time.

This is not the first time that there is a huge price gap between Bitcoin prices on Coinbase and mainstream trading platforms. A similar incident occurred in October 2018, but the main reason at that time was the collapse of USDT, which caused the price of Bitcoin on trading platforms denominated in USDT to rise. Therefore, there would be a price gap on Coinbase denominated in USD, and the attributes are inconsistent with the huge price gap this time.

Binance and Coinbase Bitcoin price difference

There is currently no direct evidence to prove that Coinbase is manipulating the market. The huge negative premium can be seen as a whale selling through the platform. However, the inability to generate new buying orders due to platform problems makes people wonder whether Coinbase is manipulating the market by relying on its advantage as a platform manager.

Software developer Vijay Boyapati said on Twitter that this is the perfect time for Coinbase to conduct an IPO. Coinbase's IPO will be a catalyst for the market, which will drive funds from the stock market into Bitcoin, and Wall Street and retail investors will be dazzled by the profits of the bull market. However, they do not understand the cyclical nature of crypto assets. The trading platform made most of the profits during the bull market, and suffered a long recession after the bull market.

Now Coinbase is at a critical stage of its IPO. Every move of this giant crypto company, which is expected by the market to have a market value of US$50 billion after its listing, has attracted strong attention from the capital market. Will the increasingly frequent downtime incidents affect Coinbase's path to listing?