After being scammed for over $500,000, one man paid one such company $6,500 to recover his stolen savings. A year later, he’s received nothing — and he’s not alone. Like countless other cryptocurrency scam victims, this southern California man’s story began the same way: an unsolicited text message from someone who said they had the wrong number in late 2021.
Weeks of texts later, the man, who Forbes agreed to identify by one of his initials, “M,” realized that he had been conned, and had lost over $500,000 – 10 years worth of his financial savings. Immediately, M went to his local police department, which he says declined to take a report, telling him to go to federal authorities instead. After a few more weeks went by, M was feeling frustrated that his case wasn’t advancing quickly enough with conventional law enforcement.
So he turned to CipherBlade, a company that claims to have recovered “millions of dollars of stolen cryptocurrency.” M signed a contract with the company, agreeing to pay $6,500 for “up to” 10 hours of work. If CipherBlade helped recover any of his money, they would also get 12.5% of that, too. But now, more than a year has passed, and M hasn’t gotten a dollar back.
“Practically all such private services require upfront payments regardless of the outcome. The reason is obvious: if they were to receive funds only when the victim actually recovers losses, most of them would be out of business very soon.”…..Binance
Pig butchering, as it’s known, is a new type of online con perpetrated by overseas scammers who “fatten” up victims – making them believe they have made boatloads of money in cryptocurrency often using manipulated apps and websites – before absconding with all their money. Experts say billions of dollars are lost to this type of pernicious scheme each year.
The hard truth is that recovering money lost to crypto scams is extremely rare, even when law enforcement does take up a case. But in recent years, a nascent industry has cropped up, offering services that promise to do just that. These companies convince consumers to spend more money in order to recover their already-lost sums, with scant evidence that they regularly work as advertised.
Multiple U.S. financial and law enforcement agencies, including the Federal Trade Commission and the Commodity Futures Trading Commission, generally tell scam victims to treat these services with a healthy dose of skepticism. That’s because even if one of these companies is involved, law enforcement still has to do its own independent investigation — for which victims aren’t charged. Plus, no private company has the authority to compel the freezing, much less the seizure, of crypto assets held at an exchange.
Inflation bond: the ultimate protection against the rising cost of living. If you know what you’re doing, you get a real yield of 1.9% on these U.S. Treasury securities. If you don’t, you’ll get a lousy deal, a bond paying 0%.Why on earth would people buy a 0% bond when the 1.9% alternative is right at hand? Because they follow the advice of naïve personal finance commentators.
The naïfs are in love with I bonds. These are savings bonds that track the cost of living. There are negatives: They have a purchase limit of $10,000 a year, they have restrictions on early redemption and they can’t be put in a brokerage account.Worst of all, I bonds have a 0% real yield. Your interest consists of a nothingburger return plus an inflation adjustment. In purchasing power, you break even.
Smart money is going into the other kind of inflation-adjusted Treasury bond, called a TIPS (Treasury Inflation Protected Security). TIPS have no purchase limit, no restriction on your ability to get out early, and no trouble going into your brokerage account.Best of all, TIPS have a positive real return. The ones due in five years pay 1.92% annually. In purchasing power, you gain 9.6% over the five years.
I can forgive the experts who were gushing about I bonds back in January. At the time, the five-year TIPS had a real yield of -1.6%. At 0% for the real yield, the I bond was clearly the better buy, apart from the inconveniences attached to getting and holding the thing.
I bonds can be held for 30 years, after which they stop accruing interest. You can’t cash them in during the first year. In years two through four, a redemption comes with a penalty equal to three months of inflation adjustments. After the five-year mark you can cash in whenever you want, collecting your full 0% return (that is, full recompense for inflation).
Where to get those TIPS? You have two options. One is to own a bond. The other is to own a bond fund. There are pros and cons to each. or the bond, arrange with your bank or broker to submit, close to the deadline, a non-competitive tender at the next auction of five-year TIPS. The tentative Treasury schedule, to be finalized on Oct. 13, is for the auction to take place on Oct. 20.
At Fidelity Investments there is no fee for an auction order placed online; the maximum buy is $5 million. Other financial institutions have similar deals. TIPS yields could go up or down over the next two weeks. If they go up, hurray. If they go down a lot, you could choose not to participate.
If you hold that bond until it matures, you are certain to collect the return set at the auction. If you cash in early by selling in the secondary market, you could be looking at either a windfall capital gain or a windfall loss, depending on whether interest rates go down or go up. That’s a fair bet, but selling would mean getting nicked by a bond trader, who will pay slightly less than the bond is worth. I’d recommend a direct bond purchase only if there’s a pretty good chance you can stand pat for five years.
The alternative is to own shares of a TIPS bond fund. Two I like are the Schwab U.S. TIPS ETF (ticker: SCHP, expense ratio 0.04%) and the Vanguard Short-Term Inflation-Protected Securities ETF (VTIP, 0.04%). The Schwab fund has bonds averaging 7.4 years until maturity; the Vanguard portfolio’s average maturity is 2.6 years. A 50-50 blend of the two funds would give you the same interest-rate excitement as a single bond due in five years.
The advantage to the funds is that they are very liquid. The haircut from trading is typically a penny a share round-trip (that being the bid/ask spread), a tiny percentage of a $50 stock.
The disadvantage to the funds is that you can’t nail down what real return you’re going to get between now and October 2027. The funds keep rolling over proceeds from maturing bonds into new bonds. The portfolios never mature.
What that means: You could wind up doing better or worse with the funds than you would have with a single bond due in five years. It depends on what path interest rates take. Again, it’s a fair bet, but you may not like this kind of uncertainty.
I’ll now address two supposed benefits to I bonds: that you can’t lose money and that you can defer tax on the interest. Can’t lose? Only in the sense that an ostrich with its head in the sand can’t lose. Savings bonds are not marked to market. You can’t see your loss.
Buy a $10,000 I bond today, and you become instantly poorer. If you plan on staying put for five years, your investment should now be valued at $9,100. That’s all your future claim on the U.S. Treasury is worth, given where TIPS yields are. If you have the sense to get out at the earliest possible date (12 months from now), then the damage is less, but it’s still damage.
The other supposed advantage to I bonds is the deferral of income tax on the inflation adjustment. This is not the bonanza you may think it is. Our current tax law is set to expire at the end of 2025. After that, tax rates are going up.
Both I bonds and TIPS adjust the interest they pay based on changes in inflation and are backed by the US Treasury, which means there is little risk of defaulting on those interest payments. But those similarities also come along with significant differences. The most important difference is that while you can buy up to $10 million worth of TIPS through Fidelity at auction, and an unlimited amount on the secondary market, I bond purchases are limited to $10,000 per person per year and are only available on the Treasury’s website, not through your brokerage account.
I bonds also require that you not touch the money you invest in them for a year and if you do so during the following 4 years you must forfeit the most recent 3 months of interest payments. These limits on both quantity and liquidity represent obstacles for both savers who want liquidity and for investors who want yield. While I bonds’ high interest rates may look appealing, a closer look at TIPS may reveal them to be more useful inflation fighting tools.
I bonds, TIPS, and taxes
Semi-annual interest payments on TIPS are subject to federal income tax, just like payments on conventional Treasury securities—or I bonds.
Any increase in the value of the TIPS principal is subject to federal tax in the year that it occurs—even though you won’t receive any income from the increase. On the other hand, when the TIPS matures or is sold, you will only pay federal tax on the final year’s increase in principal while receiving the full increase in principal since the date of initial purchase. Like all Treasury securities, TIPS and I bonds are exempt from state and local income taxes. Investors should consult their tax advisors regarding their specific situation prior to making any investment decisions with tax consequences.
While I bonds are only available at TreasuryDirect.gov, investors interested in diversifying their portfolios with TIPS can choose from individual bonds, mutual funds, or exchange-traded funds. The approach you choose should reflect your ability and interest in researching your investments, your willingness to track them on an ongoing basis, the amount of money you have to invest, and your tolerance for various types of risk. There are pros and cons for both individual bonds and bond funds. In some cases, it may make the most sense to own both. Learn more about the differences between individual bonds and funds here: Bonds vs. bond funds
TIPS are also used by professional investment managers to help protect portfolios from specific risks, says Lars Schuster, institutional portfolio manager with Strategic Advisers, LLC. “While higher inflation can be problematic for some bonds, TIPS exposure might help protect the value of the fixed income portion of a well-diversified portfolio,” he says.
You can buy TIPS directly from auctions held by the US government and at Fidelity.com. TIPS are available in 5-, 10- and 30-year maturities, at auctions spread throughout the year. You can also buy and sell individual TIPS with various maturities and prices from other investors in the secondary market. Fidelity.com does not charge fees or mark-ups on these transactions. You can learn more at Comparison of TIPS and Series I Savings Bonds
Fidelity also offers research tools including the Mutual Fund and ETF evaluators on Fidelity.com. Below are the results of some illustrative screens using the search terms “taxable bonds” and “fighting inflation” (these are not recommendations of Fidelity).
A popular smartphone app used to conduct foreign exchange transactions known as MetaTrader (or MT4 or MT5, depending on the version), was quietly removed from Apple’s App Store last Friday. As of this writing, the app remains available on the Google Play store.
The app, which is made by a Cypriot-based company called MetaQuotes, has been used to perpetrate a new type of cryptocurrency scam, known as pig butchering, where a scammer builds a longer term relationship with their victim before convincing them to invest money over time. A key element of the scam is the use of manipulated cryptocurrency apps and websites, which purport to show the victim that they’re making money off their investment, when in fact the scammer has taken everything.
Apple’s ban of MetaTrader comes two weeks after Forbesprofiled one California-based scam victim, who lost over $1 million last year. This victim, known as Cy, made all of his purported trades on the MetaTrader app, which showed him fictitious returns. At the time, Apple spokesperson Adam Dema said the company was investigating MetaTrade and was looking into additional action to protect App Store users if necessary.
MetaQuotes did not respond to Forbes’ request for comment. Daniel Delnero, an Atlanta-based attorney with Squire Patton Boggs, who informed Forbes late Sunday evening that his firm is now representing MetaQuotes, did not respond to Forbes’ request for comment by press time. The company had not previously responded at all to multiple emails sent to company email addresses. No phone numbers are listed on its Contacts page for any of the company’s multiple offices around the world.Neither Apple nor Google responded to requests for comment.
Existing installs of MetaTrader on iOS devices continue to function. However, there are some reports on Twitter of users claiming to sell iPhones with the app pre-installed for $15,000 in one case, or a “starting price” of 5,000 British pounds, or “$10k OBO,” an abbreviation for “or best offer.”As Forbes previously reported, MetaTrader, which offers licenses for its software, does enable legitimate trade by actual brokerages. It is an agnostic trading platform, one that is used by mainstream foreign exchange traders like Oanda.
But according to the Global Anti-Scam Organization (GASO), a scam victims’ advocacy group, MetaTrader also allows licensees to use a particular plug-in, known as Virtual Dealer, which can be used by scammers to “manipulate those market prices, and simulate account balances, profits or losses. Everything looks and feels real, but it’s all a fabrication,” according to a report from GASO.
MetaTrader has provided no explanation as to how unscrupulous actors can use the software to illustrate fake trades, nor what actions, if any, it has taken to mitigate this behavior. In July, the chairman of the Senate Banking Committee, Sen. Sherrod Brown, wrote letters to Apple CEO Tim Cook and Google CEO Sundar Pichai about how the companies are evaluating and ultimately allowing the proliferation of fake crypto apps in their app stores.
News of the app’s removal was first reported by FX News Group and Finance Magnates on Saturday. In a WhatsApp text message sent late Sunday evening, Cy, the victim who has still been unable to recoup any of his losses, said he was pleased that Apple had removed the trading app. He had previously told Forbes that a large part of why he was convinced to download it was that it had positive reviews and could be found on Apple’s App Store.
“It’s about time,” he wrote. “How many other victims occured before our voices were heard! [It’s] the right thing to do. But [it] doesn’t make me feel any good as the damage has been done.” Jan Santiago, GASO’s deputy director, said the organization was “glad” for the app’s removal.
“If MetaTrader won’t do anything on the grave issues raised by users who trusted them, then the responsibility falls on platforms like Apple and Google Play store that list MetaTrader,” he wrote in an email.
UPDATE Sept. 28: This story has been updated to clarify how MetaTrader was used in relation to these scams.
Perhaps one of the most notable mentions of crypto from Apple was in September 2019. when Apple Pay’s VP Jennifer Bailey said the company was “watching cryptocurrency” and strongly believes it has “interesting long-term potential.”In February 2020, Apple hired Jeff Bronikowski, Warner Music’s former head of technology innovation, who was working on a number of the blockchain efforts to create digital assets using a public blockchain called Flow .
Then on November of 2021, when asked by Andrew Ross Sorkin of New York Times if Apple would consider accepting cryptocurrency through Apple Pay, Tim Cook replied that crypto is “something that we’re looking at.” The statement is broad, but regardless, positive. In February of 2022, Apple unveiled its new Apple Pay feature that will enable millions of merchants across the U.S., to use their iPhones to seamlessly, instantly, and securely accept payments simply by tapping their iPhones. It’s called Tap To Pay and it can also be potentially used to transact crypto.
In late March of 2022, MetaMask, one of the most used crypto wallets, which has surpassed 30 million monthly active users as of January, has announced its support for Apple Pay so people can buy crypto directly from their wallets. Around the same time MetaMask announced their Apple Pay integration, this job posting below for a Senior Legal Counsel position with expertise and experience on blockchain, digital assets, and payment platforms is seen on Apple’s website. Notice the timing of the job posting and the highlighted key qualification.
This is a great sign that Apple is looking closely into integrating crypto features and functionalities like Ethereum wallets or crypto payments into Apple Pay & Wallet. It’s also worth mentioning that Apple acquired UK-based fintech startup, Credit Kudos bringing a range of payment functions in-house. Among many other things, cryptocurrency can entirely change how people buy products, save or invest money, and pay their bills. Combining these with Apple’s platform, they have the potential to help billions of users have a frictionless banking and payment experience.
Is the Cupertino giant next in line to support crypto? Rumors and hints point in that direction, but there’s a bigger picture. Apple is in a unique and powerful position to best support crypto today. Here’s why. Apple is a $2.7 trillion cap behemoth with more than 1 billion active iPhone users as of February of 2022. This means billions of people follow their software and hardware ecosystem and hundreds of thousands of people wait in excitement for their Keynote events and product releases. Though still in the early innings, there are strong signs that crypto and blockchain use cases are gaining prominence through mobile phones.
Specifically, Apple’s iPhone could be the key not only to onboard people into crypto, but to also help them understand the possibilities of transacting on a decentralized, permissionless, and transparent network. People will find it intriguing and enticing. The cool detail? People might not even need to know how crypto technology works behind the scenes. The Cupertino company has a reputation for abstracting complex technologies into simple and easy to use products.
This is one of the reasons why Apple has garnered a cult-like following over the decades in addition to their Oscar-worthy marketing and advertising efforts. This is the power of Apple. If there’s one ecosystem that will accelerate crypto’s adoption, it will be Apple’s. How? Through seamless integrations through their products, worldwide reach, and cult-like following.
Almost in every Keynote presentation, Apple CEO Tim Cook never fails to mention one important statement, “Apple believe that privacy is a fundamental human right” and they believe that users should have control of all of their data. What does this mean for crypto? Well, crypto is all about privacy, security, and transparency. In the crypto world, people have control all over their assets and there are no middlemen in between. Apple can promise trust in transactions, account protection, and ease of use by reducing cost and time for consumers when they need access to the financial banking system.
This means more market penetration while maintaining privacy, security, and transparency. In addition, Clifford Rossi, an executive-in-residence and professor in the Robert H. Smith School of Business at the University of Maryland’s Finance Department said that having a digital or crypto wallet and its own stable coin or a crypto pegged to the price of a fiat currency, could give Apple a competitive advantage over other retailers and will increase the competitive landscape of the personal banking and payment processing industry.
Another way Apple can help with crypto is the storing of private keys and seed phrases in iCloud tied with their multi-factor authentication. This will enhance the security of your sensitive crypto wallet information. Apple always does the right thing when it comes to the privacy and security of its users. The same goes for the crypto route. One popular use case of cryptocurrency is helping the ‘unbanked’ or people that are not served by financial institutions, gain to access to banking solutions which is common among developing nations.
According to several statistics, nearly 2 billion people globally still have no access to financial services. That’s like one-fourth of the world population. One day, people don’t have to go through a lengthy process just to apply for a bank account which requires a lot of documents to submit, which then can take weeks to get a result. Just imagine how hassle it will be if you’re in desperate need of money for emergency expenses. Cryptocurrency is giving people a chance to better their lives, increase their earnings, and stash savings for the future.
Apple dominates the world of tap and go payments and with more than $200 billion cash in hand, they could shake up the fintech world with an Apple Card expansion, checking accounts, international payments, and crypto wallets. Cryptocurrency is giving people in less fortunate situations instant access to money with a click of a button. There’s no need to wait for days, no expensive fees, and no need to go through a lengthy bank application process. The majority of the financially excluded individuals still live in developing nations, so for financial inclusion, cryptocurrency adoption is essential.
One quality that makes Apple great as a company is that they approach problems through design thinking. This is the same for today and for the 1980s when Steve Jobs was revolutionizing personal computing. Through the decades, Apple has built a unique reputation as an extremely design-driven company. For instance, they don’t refer to their users as “users”, but instead as “humans”. As highlighted in their human interface guidelines, which is a guideline adopted by people that work at Apple.
To that point, the current state of Web3 products has room for more design iterations due to a lackluster user experience design. This is due to the developers creating for other developers mindset and that the entire ecosystem is still in early-stage, which means there are a lot of changes. It’s also worth highlighting that Apple always turns something that seems boring and dull into something fashionable and sexy. They did that with the personal computer, iPod, iPhone, iPad, and now maybe crypto.
If and when Apple does crypto, they have the potential to set an industry standard for Web3 design by applying their own touch of Apple design. For this reason, they’re in an even stronger position to bring millions of people into crypto and even educate people about the entire Web3 ecosystem. Should we expect any crypto-related announcement from them anytime soon? As Tim Cook said, Apple thrives in its culture of secrecy, so less likely. However, we know one thing for sure, Apple never backs down on innovations that have the range to change people’s lives for the better..
As bitcoin plunged below $20,000 in mid-June, many cryptocurrency users were distraught over massive losses – with some reporting they had lost their life savings. But one corner of the internet was cheering: Buttcoin, a Reddit subforum launched in 2011 to poke fun at cryptocurrency.
“I’m addicted, I need help,” read one popular post. “I just love watching line go down too much. I always tell myself ‘after it breaks through this next support line, you’ll be satisfied’ but there’s ALWAYS another lower level after that.” “I’m actually hoping it levels off at 20K for tonight,” said another user. “I’m kinda tired and need more time to think of new lower priced memes.”
One tech industry worker who frequents Buttcoin told the Guardian they stayed up until 3am one night to watch the crash unfold. “I know this may sound pathetic but I get a dopamine hit when I see the bitcoin price going down. It was so exciting.” The cryptocurrency flirted with its two-year low again this week, which meant a festive mood at Buttcoin. With about 135,000 members, the subreddit is tiny compared with the millions of people who chat on Reddit’s many pro-cryptocurrency forums.
But frequent contributors to the community – whose logo replaces bitcoin’s golden “B” with a pair of golden buttcheeks – describe it as a kind of digital support group, laced through with dark humor, for people who are horrified by the proliferation of crypto scams and pyramid schemes. Though they may not have the power to destroy crypto, they can make jokes when it stumbles. As Buttcoin members say, instead of mining useless digital coins – they’re “mining comedy gold”.
Just like the crypto culture it mocks, Buttcoin has its own set of memes. Some of them simply flip crypto sayings. Instead of baying for token prices to rise “to the moon”, Buttcoin users chant “to the floor”. But Buttcoin’s most popular jokes take pro-crypto logic and push them to sarcastic extremes. To skewer crypto promoters’ habit of spinning negative news, Buttcoin users comment “This is good for bitcoin” under stories of cryptocurrency catastrophes. (Bitcoin’s been banned in a major country? Good for bitcoin. Bitcoin’s price is plummeting? Good for bitcoin. Someone lost their life savings to a bitcoin scam? You guessed it… good for bitcoin.)
Another crypto catchphrase smugly referencing the technology’s complexity, “Few understand,” has been become a Buttcoin meme in its own right. (For example: a Buttcoin user jokes that a 2003 Toyota Camry’s rising price amid the crypto crash makes the Camry a superior “store of value”. “Every 2003 Camry has a unique VIN and you can drive it to the supermarket too … Few understand,” another replies. “This is good for Toyota,” a third chimes in.)
Buttcoin’s most senior moderator, an IT worker who goes by spookmann, told the Guardian that the 11-year-old forum has “changed as crypto itself as grown and festered. “Originally the tone was almost entirely ‘Haha… that’s so silly!’ And certainly that element is still present, but nowadays there’s an increasingly tragic element of ‘Ugghh… so many people are having their lives ruined by this damn thing!’”
The biggest posts on Buttcoin are shot through with schadenfreude. The subreddit invariably celebrates when bitcoin, the largest cryptocurrency, dips below symbolic price levels – which to many Buttcoin users, proves that the scam is unraveling. “I definitely get hopeful when it starts seriously dipping or when some stablecoin scheme goes to zero,” said Joe, a systems engineer who browses Buttcoin every day. “There’s a kind of thrill to the validation of it, right? Especially since the crypto bro stereotypes are so obnoxious whenever it goes up in a new bubble.”
But the more controversial posts mock crypto investors themselves for losing money – though there’s disagreement over how far to go. Some highly rated posts on the subreddit argue that there should be no sympathy for victims. “They can go fuck themselves,” read one post in late June, with more than 1,500 upvotes: “Criticizing scams is not being mean. This also isn’t a support group to help console people who lost all of their money on ElonDogPoop Coin.” Not all Buttcoin users agree. “Even if they are assholes, I don’t relish the idea of the average [investor] losing their life savings even if they should have been able to see the scam for what it is. That unambiguously sucks,” Joe says.
There’s a “shared enjoyment of watching things go up in flames”, said M, a Buttcoin user and a tech industry worker, but he still has “sympathy for those drawn into crypto by family members or by the promise of a better life … Times are tough for most.” He pointed to the victims of Celsius, an unlicensed crypto “bank” that offered massive returns to over a million investors in an alleged ponzi scheme that collapsed earlier this summer. The court testimonies – which included pleas from ordinary people who lost their life savings – were “heartbreaking”, M said.
Because Reddit’s pro-cryptocurrency forums quickly delete critical posts, Buttcoin also attracts users looking to commiserate over loved ones who have been caught up in the scam. One support seeker was Izzycc, a 23-year-old social work student whose boyfriend of eight years had become depressed after getting sucked into the NFT fad and losing money.
“I’m absolutely fucking praying for the downfall of cryptocurrency,” she wrote. “It would mean a wakeup call for him, he might finally pull out of this scam, and maybe even start to feel a little better not staring at a number that’s only going down.” Buttcoin users urged Izzycc to break up with her boyfriend – and so she did. “It was for a couple of reasons, but the NFT stuff was kind of a big one,” she told the Guardian.
“I just hated being around it all the time. I hated when he would talk to my family about it. It was just kind of embarrassing, I guess.” She’s doing “a lot better now”, but still browses Buttcoin: “The people are funny, and I know too much about cryptocurrency to not at least casually browse the site at this point.”
Buttcoin sometimes deals with heavier tragedy. In August, a user described a close friend who had gone all-in on crypto before he killed himself. “I was secretly making fun of him,” the user wrote, “till I recently heard the bad news … and it’s hard to feel sorry for crypto bros, but now that I’m here, I do.” “I’m tearing up hearing about this,” wrote one user. Another user observed: “This sub makes a lot of jokes that I consider comic relief, but everything about this sucks, in reality.”
That’s the tension that runs through Buttcoin: beneath the memes lies real pain – and a frustration of watching helplessly as more people around you get hurt. “I think if the crypto cult was just a bunch of dudes off in the woods with a server farm and a maypole there wouldn’t be any real call for Buttcoin to exist,” said Joe. “But it apparently intends to stick around and become a sufficiently big part of the world overall that I don’t have that option.”
Buttcoin isn’t so much a force for resistance as it is a coping mechanism, Joe said, and one that at least for him, may even be backfiring.
“I’m pretty sure the algorithms have actually been sending me more crypto ads since I started posting regularly because they can’t tell the difference between ‘I’m reading about how absurd this is’ and ‘I’m reading about this as a potential sucker/customer.’” He refreshes Buttcoin anyway, hoping he’ll one day witness the price go all the way to the floor.
A Reddit forum devoted to skewering cryptocurrency investors and the industry’s neverending scams says it’s “mining comedy gold” instead of Bitcoin, which it prefers to label Buttcoin. Home to 135,00 members, the Buttcoin community arose in 2011, well-ahead of the current bear market in the crypto industry, which has wiped out some people’s savings. The subreddit’s emblem is gilded butt-cheeks, according to the Guardian.
For dark comic relief, Buttcoiners take widely-used crypto catchphrases by Bitcoin boosters like “going to the moon” and derisively supplant them with going “to the floor.” They also ironically label objectively catastrophic events as “good for Bitcoin,” such as when a country levies a nationwide prohibition on crypto or an entire crypto lender goes bankrupt, leaving destitute creditors in their wake. Other gripes with Bitcoin include its lack of utility in the world and the high environmental footprint associated with mining.
In recent months, there’s been an uptick in groups chronicling the failure of decentralized finance and crypto. From Molly White’s “web3 is going just great” to the Cryptic Critics’ Corner podcast, these places are seen as an antidote to the often breathless coverage of crypto in some corners of the internet.
According to the Guardian, some subreddit users even get a dopamine hit when the price of Bitcoin plunges. “I definitely get hopeful when it starts seriously dipping or when some stablecoin scheme goes to zero,” a Redditor named Joe told the Guardian.
But even Joe has the self-awareness not to plunge too deeply into schadenfreude: “Even if they are assholes, I don’t relish the idea of the average [investor] losing their life savings even if they should have been able to see the scam for what it is. That unambiguously sucks.”
Leading crypto exchange Coinbase reported a Q2 net loss of just under $1.1 billion this afternoon, or $4.98 a share, as sales fell more than had been expected and the company’s company’s stock tumbled 6%.
The beleaguered exchange has been hit hard in recent months by a confluence of declining cryptocurrency market conditions, regulatory pushback and investor uncertainty that has dragged its stock price down over 55% since late March.
Coinbase recorded the majority of its $802.6 million in revenue last quarter–over 80%–from transaction fees on sales and exchanges of cryptocurrency. That’s down 61% from the corresponding 2021 quarter and 35% less than Q1.
Analysts had predicted revenue of $868.4 million for the quarter and an adjusted per share loss only about half as severe as reported. In Q2 2021, the company earned $1.6 billion.
The below-consensus revenue may have been reflected rising use of the exchange by customers who aren’t there currency trading, according to Michael Miller, an equity analyst at Morningstar. “Coinbase’s problem wasn’t so much that customers abandoned it — transacting users were essentially flat sequentially — but that there was a shift toward non-traders, such as those involved in staking.”
Despite the flood of red ink, Coinbase has an ace in the hole: its $6.2 billion of cash in the bank, barely changed from Q1. That figure includes $362 million of stablecoin USDC.
“Coinbase is really caught out with its cost structure, and now that crypto prices have come way down, they’re in a position where they do need to cut costs pretty dramatically,” says Miller. “While they are caught out on the costs side, though, they did go into this crypto downturn with a very strong balance sheet.”
The exchange cut costs aggressively last quarter, laying off 1,100 employees, 18% of its workforce, in mid-June and reducing its marketing outlays from a high point last fall (in which it spent $14 million on a single 60-second Super Bowl ad). Operating expenses, adjusted to remove cryptocurrency impairments, fell to $1.48 billion in Q2 from more than $1.5 billion in each of the two previous quarters but were still higher than $1.3 billion a year earlier.
“Expenses haven’t come down much—they were more or less flat sequentially. Coinbase did reduce cost guidance for the rest of 2022, though,” says Miller. “It does sound like they’re comfortable with this level of losses—they were within the guardrails they set. Unless revenues decline further, I wouldn’t expect to see any further layoffs.”
Coinbase’s web engagement fell dramatically, according to data from Simliarweb: visits to coinbase.com fell 45% in June, even while U.S. sites of competitors like FTX showed them more than doubling. Moreover, Coinbase’s weekly web display ads have dropped by over 35% since early June.
“By looking at web traffic and app traffic, you just see a trend towards somewhat of a decline in engagement for cryptocurrency in general,” says David Carr, senior insights manager at Similarweb. “But for Coinbase, the decrease in the percentage of customers using the app on a regular basis and the decrease in the amount of time they spend on the app are signs of lesser enthusiasm.”
Ben Weiss, CEO of crypto financial services and Bitcoin ATM provider CoinFlip, says the market may be overly pessimistic. “I feel that the market is conflating the performance of crypto assets with the companies in the crypto ecosystem, and therefore the reduction in Coinbase stock price is possibly an overcorrection,” says Weiss. “Coinbase is a household name in the crypto space and is extremely competitive among crypto exchanges. While companies must continue to innovate to stay relevant, Coinbase is still extremely well positioned among exchanges to continue to capitalize in the crypto space.”
Coinbase operates as a remote-first company and has no physical headquarters As part of its SEC filing to go public, the company reported 43 million verified users, 7,000 institutions, and 115,000 ecosystem partners in over 100 countries. It also reported net revenue of $1.14 billion in 2020, up from $483 million the previous year. The company also reported a net income of $322 million after posting a loss in 2019.
Out of the $782 billion worth of assets on the crypto market, some $90 billion worth is held on the Coinbase platform. As of 2018, the company offered buy/sell trading functionality in 32 countries,while the cryptocurrency wallet was available in 190 countries worldwide. In a May 2022 Form 10-Q filing, Coinbase stated that “because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors“.
The “Coinbase Effect” refers to the rise in price of cryptocurrencies listed for sale on a dominant crypto exchange such as Coinbase in the days after the news becomes public. According to Barron’s, the effect of getting a cryptocurrency listed on the exchange plays a big role in what cryptocurrencies gain widespread acceptance.
On February 16, 2018, Coinbase admitted that some customers were overcharged in error for credit and debit purchases of cryptocurrencies. The problem was initiated when banks and card issuers changed the merchant category code (MCC) for cryptocurrency purchases earlier that month. This meant that cryptocurrency payments would now be processed as “cash advances”, meaning that banks and credit card issuers could begin charging customers cash advance fees for cryptocurrency purchases.
Customers who purchased cryptocurrency on their exchange between January 22 and February 11, 2018, could have been affected. At first, Visa blamed Coinbase, telling the Financial Times on February 16 that it had “not made any systems changes that would result in the duplicate transactions cardholders are reporting.” However, the latest statement from Visa and Worldpay on the Coinbase blog clarifies: “This issue was not caused by Coinbase.
In March 2018, Quartz reported that the number of monthly customer complaints against Coinbase jumped more than 100% in January of that year, to 889, citing official Consumer Financial Protection Bureau data, with more than 400 of those categorized as “money was not available when promised”.The article also noted that the company was subsequently increasing its customer service staff to reduce wait times. In December 2021, CNBC reported that Coinbase froze the cryptocurrency GYEN due to a sudden price spike, resulting in many traders losing money.
On July 22, 2022, a former Coinbase product manager, Ishan Wahi, along with Nikhil Wahi (Ishan’s brother) and Sameer Ramani (a friend), was charged in the first-ever insider trading case in cryptocurrency by prosecutors for the Southern District of New York and the Securities and Exchange Commission.According to the complaint filed in SEC v. Wahi, Ishan Wahi allegedly shared information that certain tokens were about to be listed by Coinbase with Nikhil Wahi and Ramani, who then allegedly acted upon that information to make trades for an alleged illicit profit in excess of $1.5 million.
According to federal prosecutors, Ishan Wahi purchased a one-way ticket to India upon being summoned by Coinbase to the company’s Seattle office for a meeting. Wahi was subsequently intercepted by law enforcement from boarding a May 16 flight to India. Coinbase’s chief security officer, Philip Martin, noted that the company provided prosecutors with information from an internal investigation.