Bloomberg Analyst Defends Coinbase Amid Allegations of Manipulating Bitcoin’s Price
Bloomberg senior ETF analyst Eric Balchunas recently refuted claims made against Coinbase, accusing the exchange of not using BlackRock’s funds to buy actual Bitcoins (BTC). The rumors, which surfaced on social media on Sept. 16, alleged that Coinbase was issuing letters of debt instead of backing IBIT ETF with Bitcoin. Furthermore, speculators accused the exchange of using the asset manager’s funds to manipulate Bitcoin’s price.
However, Balchunas dismissed these claims as absurd, stating that BlackRock would not tolerate any such behavior from Coinbase. He emphasized that such actions would violate regulations and that BlackRock is a serious player in the market.
Coinbase CEO Responds to Allegations
Coinbase CEO Brian Armstrong also addressed the allegations, clarifying that all mints and burns related to the ETFs in the firm’s custody are ultimately settled on-chain. He explained that institutional clients have off-chain options before trades are settled on-chain, such as over-the-counter desk trading. Armstrong highlighted that all funds are settled in Coinbase Prime vaults within one business day, ensuring transparency and efficiency in transactions.
ETF Holding Back Sell Pressure
According to Balchunas, the rumors about Coinbase not using BlackRock’s funds to buy actual Bitcoins may have surfaced due to Bitcoin investors looking for reasons behind the ongoing selling pressure on BTC since March. He reiterated that ETFs have actually helped prevent significant drops in Bitcoin’s price, contrary to the allegations of manipulation.
Controversy Surrounding cbBTC
The controversy surrounding Coinbase extended to its new synthetic Bitcoin product, cbBTC, which quickly surpassed a market cap of $100 million on its launch day. Tron founder Justin Sun raised concerns about cbBTC lacking proof of reserves and the potential for the US government to freeze users’ balances. Critics within the community echoed these concerns, labeling cbBTC as a “paper” version of Bitcoin.
In response to these allegations, Armstrong acknowledged that users must trust a centralized custodian to store the BTC backing Coinbase’s product. Despite the criticisms, Coinbase continues to stand by its products and services, emphasizing transparency and security in all transactions.