Coinbase raises $2 billion in junk bond sale

[bbc.reporter]

This is clearly good news for the continuation of the bull market because this appears to be a big endorsement on the cryptospace or the institutional investors remain to have billions in extra liquidity to invest and pump prices to new all time highs hehe.



Junk-bond investors gave cryptocurrencies their biggest endorsement yet as Coinbase Global Inc. sold $2 billion of debt.

Demand was so high -- at least $7 billion of orders poured in -- that the crypto behemoth was able to boost the deal’s size from $1.5 billion, according to a person with knowledge of the matter.

The warm welcome from fixed-income investors shows that cryptocurrency is no longer a sector reserved for venture-capital funding, as debt investors including pension funds and hedge funds look to get in on the action.

Source https://www.bloomberg.com/news/articles/2021-09-14/coinbase-s-junk-bonds-show-crypto-really-is-going-mainstream

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[timerland]

Not sure what to make of this.

These people have an irrational confidence in Coinbase for absolutely no reason in my opinion. To risk billions of capital at 3% at such a volatile market that is rapidly evolving away from the centralized exchange model is utterly riduculous.

There is still a LOT of disruption left in this space. Coinbase is not the big dog. No doubt about that.

[Timelord2067]

according to a person with knowledge of the matter. doesn't instill much faith in the source of the speculation at the heart of the report.

It's like school playground gossip.

[condoras]

according to a person with knowledge of the matter. doesn't instill much faith in the source of the speculation at the heart of the report.

It's like school playground gossip.

These generalities from the media always have a purpose and sometimes foretell things. Maybe it's true or maybe is just gossip as you said, but something will happen for sure. Why Bloomberg make such an article? Now what it will be, I don't know. I guess we will know eventually.

P.S: For me, the last line of the article has more meaning / gravity: "Goldman Sachs Group Inc. managed the sale of the Coinbase notes."

[The Sceptical Chymist]

according to a person with knowledge of the matter. doesn't instill much faith in the source of the speculation at the heart of the report.

I don't know; sometimes what those anonymous sources say turns out to be the truth--but believe me, I get what you're saying.  Those types of statements are one of the reasons why I don't trust much of what the media throws at us.

OK, much of that article is blah blah blah, but after reading OP's post I was left wondering "What the hell does Coinbase need $2 billion for?" and after looking at the article the only thing it says is:

Coinbase, a crypto brokerage and exchange, is earmarking its greater proceeds for general corporate purposes, potentially including product development and takeovers.

"General corporate purposes", eh?  I assume that means big, fat bonuses for its executives.  But the latter part of that quote seems purely speculative, so I'm still wondering what Coinbase needs all that money for.  I bet they have something big planned, because that money they're borrowing in the form of junk bonds isn't cheap.  If they didn't think they had an idea that justified that much, I doubt they would have issued all those junk bonds.  I wonder if they're going to buy out some other exchanges.

[PrimeNumber7]

OK, much of that article is blah blah blah, but after reading OP's post I was left wondering "What the hell does Coinbase need $2 billion for?" and after looking at the article the only thing it says is:

Coinbase, a crypto brokerage and exchange, is earmarking its greater proceeds for general corporate purposes, potentially including product development and takeovers.

"General corporate purposes", eh? 

This particular language was used by Coinbase itself. The "general corporate purposes" is fairly "standard" language that many companies use when raising money for unspecific purposes, often due to favorable market conditions.

I think there is probably a fairly good chance that Coinbase will use some of this money to fund one or more acquisitions in the near term. They have not yet agreed to terms with a specific company, and probably not even have a specific company in mind yet.

[DaveF]

Junk bond / junk debt sales are having a record year in general.
https://www.wsj.com/articles/junk-debt-sales-soar-toward-record-year-11632043982

So a good year for junk bonds & a good year for bitcoin and it's no surprise a crypto business like Coinbase can sell a ton of junk bonds.
Coming up in tomorrows news.....water is wet.

-Dave

[sikke]

This is truly a sign of an overheated bond market.

Coinbase is one hack away from losing half of their balance sheet, and it has happened before. If DeFi ever becomes big they will also be eliminated - they aren't even the first mover in this space.

If there is a way of shorting these bonds, I certainly would.

[PrimeNumber7]

If DeFi ever becomes big they will also be eliminated - they aren't even the first mover in this space.

Coinbase makes its money by being able to allow people to buy crypto via their bank accounts. DeFi does not allow for this.

I don’t think CB is going anywhere. 

It is very difficult for DeFi to offer margins trading. For this reason, centralized exchanges will be able to survive.

[bbc.reporter]

according to a person with knowledge of the matter. doesn't instill much faith in the source of the speculation at the heart of the report.

It's like school playground gossip.

However, how can $2 billion in junk bond sales be playground gossip? It was Moody’s that classified those bonds as junk bonds because of the cryptospace’s uncertain regulatory environment. I am also quite certain the documents of the sale has been processed and reported to the SEC.

[DaveF]

This is truly a sign of an overheated bond market.

Coinbase is one hack away from losing half of their balance sheet, and it has happened before. If DeFi ever becomes big they will also be eliminated - they aren't even the first mover in this space.

If there is a way of shorting these bonds, I certainly would.

Although it's a bit OT, yes you can. Just like any other security.
But:
You have to have enough money / other things in your brokerage account to cover the full cost.
You are going to be paying interest on the amount.
And your brokerage has to support it.

The obligatory: This is not financial advice, speak to your financial advisor before doing it. And this is US based info, other parts of the world can and will have different rules and laws about it.

-Dave

[cafucafucafu]

Eerily similar to the dotcom bubble when bond spreads were super low.

Whilst it is good to see that the crypto space is getting a lot of attention and mainstream funding, it's certainly disconcerting how easily this is coming.

I personally don't think that it's a good idea to invest in either Coinbase equities or their debt. It's way too much exposure to the crypto market for no reward basically.

[cabron]

This is truly a sign of an overheated bond market.

Coinbase is one hack away from losing half of their balance sheet, and it has happened before. If DeFi ever becomes big they will also be eliminated - they aren't even the first mover in this space.

If there is a way of shorting these bonds, I certainly would.

Coinbase actaully tried to have its Lending platform launch but the SEC killed it by a lawsuit threat. Crypto is going mainstream but it will take a lot of force.

This is why coin base is using themselves as bait here so they want to lawsuit to go so that there will be a clearer regulation to abide. I think Binance should also do the same once and for all so that we may really know what SEC has to regulate.

Do people still trust coinbase so much? I thought investors must have lost confidence in them after the sale of there IPO, where is was reported that the team played pranks to purchase more bitcoin whereas the share dumps massively in the exchange. Many manipulation,

It's the largest in the US and it's on NASDAQ, how can we not trust it?    COIN is already about to go up, no fuzz now I guess the ones who lose are the ones who sold.

[Timelord2067]

However, how can $2 billion in junk bond sales be playground gossip? It was Moody’s that classified those bonds as junk bonds because of the cryptospace’s uncertain regulatory environment. I am also quite certain the documents of the sale has been processed and reported to the SEC.

I think we're straying away from the fact that this is how the sub-prime mortgage lending got out of hand with the debt on sold to whomever saw a chance to earn a quick buck that increasingly wasn't there.

Unlike the housing crash, there's no "tangible" item to recover or even abandon with crypto.  Coinbase might have cleared $2B of debt, but someone has to carry that debt until it's repaid (which I doubt will ever happen)

[bbc.reporter]

@Timelord2067. This is why I expressed some skepticsm upon sharing this news. It appears that there are institutional investors in Wall Street who remains to have billions in unsused liquidity and they are not certain where to invest them hehe. Coinbase junk bonds appear to be the low hanging fruit.

[condoras]

@Timelord2067. This is why I expressed some skepticsm upon sharing this news. It appears that there are institutional investors in Wall Street who remains to have billions in unsused liquidity and they are not certain where to invest them hehe. Coinbase junk bonds appear to be the low hanging fruit.

Or their new stepping stone for taking bigger "debts", thus bigger positions or control? I don't believe though that such investors need to wait or that they don't have enough funds to go for more when and if they see fit.

[Timelord2067]

Or their new stepping stone for taking bigger "debts", thus bigger positions or control? I don't believe though that such investors need to wait or that they don't have enough funds to go for more when and if they see fit.

If your only source of income is interest off of the funds that people owe you, then your exposure is far greater then if you have other income streams such as cold hard cash in the bank.  If those lenders all come from a similar sector of society e.g. miners in a small town and the mine shaft collapses causing the mining operations to fail - then you are left with their potentially unrecoverable debt.