Update: 05/03 – Coinbase has since announced (March 4th) that it has decided to transition out employees of Neutrino who had previously worked at controversial Italian computer surveillance software company Hacking Team, although as yet no timeline or specifics have been given.
Coinbase, a leading US-based cryptocurrency exchange, has been seeing crypto Twitter attack it from all sides in the last few months, as the cryptocurrency community seemingly doesn’t agree with its recent moves, and has been letting it know.
Back in 2017, seemingly every member of the cryptocurrency community backed Coinbase, and saw it as the future of the ecosystem. At the time, the cryptocurrency exchange was growing rapidly, and fighting the IRS in court over an attempt to get information on its users.
The regulator managed to win, and Coinbase was forced to release information on investors who traded over $20,000 on its platform between 2013 and 2015. Since then, however, things have been changing, and social media users have in fact launched various campaigns to try to get others off of Coinbase.
Bitcoin Cash Listing
While it’s hard to pinpoint exactly when things started changing for Coinbase, the Bitcoin Cash (BCH) listing incident was a notable event. When the company announced it was listing BCH on its Coinbase and now Coinbase Pro platforms, the cryptocurrency’s price surged.
According to lawsuits, however, insiders who knew BCH was going to be listed were able to buy it ahead of time, before the cryptocurrency’s price went up in what has become known as the “Coinbase effect.”
It’s further alleged that Coinbase allowed insiders to place orders before opening the market to the public. As soon as it did, CryptoCompare data shows BCH went to a $9,500 high on its platforms, before trading was halted.
Soon after, the company re-enabled trading, but the damaged had already been done. Although its own investigation later on found there was no insider trading, the cryptocurrency community seemingly didn’t buy it.
Those who support XRP are known to be vocal on social media, and have campaigned for Coinbase to add the cryptocurrency for years. As Coinbase kept adding more and more tokens – including 0x, Brave’s BAT, BCH, and ETC – the XRP community felt more outrage, seemingly taking Coinbase’s inaction as an attack.
Soon, some of its fans launched a #DeleteCoinbase campaign on social media, where they posted pictures and videos of themselves deleting their accounts from the platform. Late last year, however, Coinbase revealed it was considering adding various digital assets – and XRP was among them.
Earlier this month, XRP was finally listed on the platform.
When XRP?? Now! XRP/USD, XRP/EUR, and XRP/BTC order books will soon enter transfer-only mode, accepting inbound transfers of XRP in supported regions. Orders cannot be placed or filled. Order books will be in transfer-only mode for a minimum of 12 hours. https://t.co/MWUtUm4wRh
— Coinbase Pro (@CoinbasePro) February 25, 2019
While the listing pleased XRP fans, it didn’t please the rest of the cryptocurrency community, as XRP seemingly suffered the “Coinbase effect.” The cryptocurrency’s price surged after being listed, but shortly before the announcement was published its price went up.
According to some on social media, XRP was initially bought by insiders, who were getting ready to take advantage of the Coinbase effect, and then dump the tokens on the platform for a profit.
Want to know how insider trading works?
— Sir ฿itlord 🇦🇺 📚 (@Crypto_Bitlord) February 25, 2019
Moreover, some in the cryptocurrency community accused Coinbase of breaking its own rules on listing cryptoasset. The company, last year, published a set of guidelines of follows to list assets on its platform, which include claiming the “ownership stake retained by the team” should be a “minority stake.”
Ripple, the company behind the token, is said to have 60% of its supply. To Weiss Ratings, the listing seemingly shows Coinbase is unable to hold on XRP fans.
#Blockchain research firm Diar reports that #Ripple holds 60 percent stake in #XRP, violating #Coinbase rules. As the number 3 crypto by market cap, Coinbase cannot afford not to list XRP. Stop fighting the market – XRP is here to stay.
— Weiss Ratings (@WeissRatings) February 27, 2019
The move could have been made in an attempt to survive the bear market. As covered, crypto’s falling prices have seen the cryptocurrency exchange’s popularity decline, so much so it went from 126 million monthly visits in January of last year to 28 million in June. SimilarWeb data shows it had 21.9 million visits last month.
Backing Up Private Keys to the Cloud
More recently, Coinbase released a feature that allows its Coinbase Wallet users to backup their private keys to either iCloud – in the case of iOS – or Google Drive – in the case of Android. The move was swiftly criticized by industry experts, as it could be a security risk.
While the feature is completely optional, various crpyotcurrency enthusiasts, especially those who strongly believe in decentralization and self-sovereignty, pointed out that this leaves users vulnerable for the sake of convenience, and could see hackers steal thousands worth of crypto if they managed to access users’ accounts.
🔐☁️ Introducing Cloud Backup for your private keys on Coinbase Wallet!
Backup to your personal iCloud or Google Drive, and explore the open financial system with peace of mind. https://t.co/6uaHT8AZky
— Coinbase Wallet (@CoinbaseWallet) February 12, 2019
Cold storage solutions are notably seen as a better alternative to store cryptocurrencies in a safe way.
Currently, the cryptocurrency exchange is facing yet another campaign on social media, as distraught crypto investors are currently tweeting pictures and videos of themselves deleting their Coinbase accounts under the #DeleteCoinbase banner.
This time, the straw that broke the camel’s back seems to have been a recently announced acquisition. Via its official channels, Coinbase revealed it acquired Italian startup Neutrino, which leverages public blockchain data to trace cryptocurrency transactions.
Its goal was to track illicit activity and help make sure cryptocurrencies weren’t used by criminals. Soon after the acquisition was announced, however, crypto analysts, including Arjun Balaji, pointed out Neutrino’s team had a not-so-good past.
Congrats to Coinbase on the acquisition of chain analysis startup Neutrino!
FYI, the CEO, Giancarlo Russo, was ex-COO of HackingTeam (https://t.co/qyQ6mLU8XE), who sold “offensive intrusion and surveillance capabilities to governments, law enforcement agencies and corporations.” pic.twitter.com/VVza5AjIYa
— Arjun Balaji (@arjunblj) February 19, 2019
Some of the startup’s team members were allegedly the former leaders of Hacking Team, a group of vendors who sold surveillance capabilities to oppressive regimes throughout the world, which used them to monitor dissidents, activists, and journalists.
As a result, the #DeleteCoinbase was launched:
— m0b1lx (@m0b1lx) February 28, 2019
— Nagaraj Hubli ⚡ (@nagaraj_hubli) February 28, 2019
Along with it, the #DeleteCoinbaseTrustChain campaign was launched. As the exchange doesn’t let accounts with dust (read: extremely small) balances get deleted, a chain was created so users send their dust to someone else, and then delete the account.
As if the situation couldn’t deteriorate further for the beleaguered exchange, this past weekend saw Coinbase Head of Sales Christine Sandler reveal during an interview with Cheddar that contractors the company employed had apparently been selling customer data:
It was important for us to migrate away from our current providers […] They were selling client data to outside sources and it was compelling for us to get control over that and have proprietary technology that we could leverage to keep the data safe and protect our clients.
The admission, although debated by some on social media, has almost certainly added to the company’s woes, with prominent crypto analyst Udi Wertheimer encapsulating much of the community’s displeasure on Twitter:
YOU DID WHAT?!?!
And that’s why we should trust the people you choose to do business with?!?! https://t.co/XBb3ncHmxI
— Udi Wertheimer (@udiWertheimer) March 3, 2019
All in all, it appears Coinbase’s downward traffic trend is set to continue. At press time, CEO Brian Armstrong hasn’t made a statement on the Neutrino acquisition nor about the social media campaigns.