Is Coinbase in Trouble? 4 Reasons to Avoid Coinbase in 2024 (July Update)
Coinbase is facing all kinds of problems. Is it time for customers to seek out an alternative in July of 2024? We think so. Let’s talk about the top 4 reasons to avoid Coinbase!
Matt Ruby and Drew
Jun 21, 2024June 21, 202414 min read14 minutes read
Coinbase, the largest U.S.-based crypto trading platform, is facing obstacles in the form of hostile regulators (including the SEC, which sued the company), data breaches, disgruntled customers, and technical glitches.
Plus, it’s facing new competition from fund companies and brokerages. As a result, the future of the platform is viewed by some as uncertain…
This piece will explore the company’s challenges and why some investors are seeking out a Coinbase alternative.
The rise of Coinbase
With tens of millions of users, Coinbase is one of the most widely used online cryptocurrency exchanges, ahead of Kraken and a many others. Customers use it to buy Bitcoin, Ethereum and Solana along with over 120 other different types of cryptocurrencies.
During the fourth quarter of 2023, the company saw its revenues rise 41% quarter over quarter to $954 million, while the stock price jumped close to a two-year high.
Sounds like good news for the platform, right?
Well, hold on…
Recent controversies
Coinbase keeps finding itself in hot water. For starters, it’s repeatedly found itself the target of government regulators. The U.S. Securities and Exchange Commission (SEC) launched a major lawsuit against Coinbase, claiming it operated as an illegal securities exchange, broker, and clearing agency.
Coinbase was also levied a $50 million fine to settle allegations from New York regulators. The regulators found Coinbase broke the law by not doing enough to prevent money laundering on its platform.
“Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth, ” Adrienne A. Harris, New York’s superintendent of financial services, said in a statement. “That failure exposed the Coinbase platform to potential criminal activity requiring the Department to take immediate action.”
UPDATE: On Wednesday, March 27th the U.S. SEC scored a big win against Coinbase. A judge ruled that the SEC’s claim that Coinbase has engaged in the sale of unregistered securities could be heard by a jury at trial.
Meanwhile, there have also been widespread issues with how Coinbase treats customers…
Poor customer support
Long wait times to get support
According to many dissatisfied customers
Getting help from Coinbase requires extensive time and effort.
Former Coinbase employees have even admitted that the support department struggles to keep up with demand.
In fact, customers often wait days before getting a response.
One major sticking point has been a pattern of account takeovers that steal funds, followed by ineffective customer service (primarily via email) from Coinbase.
Many customers report difficulty reaching representatives when this happens — they claim they still have not been made whole for their losses too.
Add in legal fees, and you can see why customers are frustrated.
“Most people who contact me would tell you it’s poor customer service,” said David Silver, an attorney focused on cryptocurrency.”
“They’re being almost victimized twice. Because they themselves have almost no ability to contact Coinbase and deal with them directly, they’re forced to retain professionals.”
Difficulty in contacting support
The Better Business Bureau determined that Coinbase has a “Pattern of complaints from customers who state they are locked out of their accounts, even after providing required information or updates.”
The BBB received 3,339 complaints about Coinbase over the last 11 years.
“I’ve been waiting for over five months for Coinbase to unlock my account and allow me to access my funds. I’ve never experienced or even heard of such a long wait time for action to be taken on an open customer support ticket and I honestly have no idea how to proceed.”
“I’ve been trying to connect my bank [account] so I don’t keep having to do wire transfers…It’s costing me lots of money and… I have got at least 3 tickets total. They just keep giving me the run around and closing unresolved tickets!”
And Coinbase’s iffy support has also been a topic of discussion on Quora.
“Some users have reported that Coinbase’s customer support can be slow to respond or unhelpful in certain situations, particularly during times of high demand or market volatility. Coinbase has acknowledged these issues and has been working to improve its customer support by hiring additional support staff and improving its support systems.”
Plus, there have also been technical issues reported at the site…
Technical issues
Frequent system crashes
System crashes have been an issue for Coinbase too.
When the company ran a Super Bowl ad, it generated 20 million hits, temporarily crashing the site. Another time, Coinbase went down during a big pump day for Bitcoin.
On February 28th, 2024 Coinbase suffered another glitch that left many users seeing a zero balance in their account. This crash happened again during a +10% price pump day for Bitcoin.
Coinbase status page
The Coinbase status page is used to communicate any issues with their products, including planned and unplanned outages.
According to the Coinbase Status page, the Coinbase exchange experiences an outage issue nearly every single day.
There have also been reports of delays in completing transactions at Coinbase. The company explains:
“Our nodes may lose sync with the rest of the network for short periods of time, which can cause transactions to remain pending longer than normal. Usually the delay is under an hour and the transaction will eventually go through normally.”
In the past, the company also reported delays in deposits and withdrawals on its Stellar platform.
Another time, Coinbase stopped transactions for U.S. users for over five hours due to an issue preventing the company from processing withdrawals or deposits involving bank accounts:
“We are currently unable to take payments or make withdrawals involving U.S. bank accounts. Our team is aware of this issue and is working on getting everything back to normal as soon as possible, ” Coinbase explained on its status page.
Issues with withdrawals
Also, Coinbase customers have frequently complained about unexplained account closures and stalled withdrawal requests on Reddit.
“The past week has seen a rising number of Coinbase customers complaining on the exchange’s Reddit forum about their accounts being closed without any explanation. Many of these complaints include quotes from Coinbase that refuse to divulge the justification behind the closures, in some cases citing ‘a variety of factors, ’ all of which go unexplained due to ‘security reasons.’
The explanations Coinbase gives are lackluster.
For example, the company has prevented individuals from converting their assets to fiat cash, stating that “We can no longer continue our banking relationship.”
Pressed for details, Coinbase responded it was “Unable to elaborate on our process for this.” No wonder customers wind up peeved.
Failure to protect user funds
In fact, Coinbase repeatedly avoids responsibility for security breaches.
“Coinbase Global Inc. says it’s not responsible for losses stemming from a security breach, according to an account holder who sued in an attempt to recover $96,000 that he says was stolen from him. Jared Ferguson of Staten Island, New York, claims he received a text from his mobile carrier in May describing a SIM card change request that he hadn’t made. When he restored service to his iPhone the next day with a new card, Ferguson said he learned that almost his entire life savings was gone from his Coinbase account.”
Lack of transparency
Poor communication with customers
As mentioned previously, communication with customers is frequently cited as a sore spot at Coinbase.
Complaints of poor customer service frequently make the rounds on social circles (mainly Reddit and Twitter), with users commonly claiming late responses on their service tickets, among other concerns.
As Coinbase grew, projects started to feel overstaffed, and the decision-making process slowed amid layers of bureaucracy, according to five people familiar with the company. Longtime employees were concerned that new hires felt “rudderless, ” one person said, and joked that you could tell the length of someone’s tenure at Coinbase by the number of times the new recruits came to them asking for help.
Coinbase highlights why Bitcoin cold storage is so important.
Confusing policies and procedures
The company has also come under fire for its unclear policies.
According to an SEC complaint, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities. The SEC alleges that Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without registering any of those functions with the Commission as required by law.
In 2021, the Commodity Futures Trading Commission issued an order against Coinbase for “reckless false, misleading, or inaccurate reporting as well as wash trading by a former employee on Coinbase’s GDAX platform.”
The order required Coinbase to pay a civil monetary penalty of $6.5 million and to cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations.
“Reporting false, misleading, or inaccurate transaction information undermines the integrity of digital asset pricing, ” said Acting Director of Enforcement Vincent McGonagle at the time.
Confusion also surrounded Coinbase’s entry into the marketing of cryptocurrency futures.
Following the recent announcement of Coinbase’s entry into cryptocurrency futures marketing, rumors have emerged that the company might employ this technology for “front-running” investors. This concern stems from Coinbase’s existing utilization of such technology not only to enhance corporate revenue but also as a provider of futures contracts.
Coinbase’s Garrett Balliett tried to put out the fire with this explanation:
“We offer derivatives and futures products to our clients and institutional as well, particularly institutional clients that do provide those services. But it’s somewhat conflated because that isn’t also the same as us actually taking out those positions ourselves. But while we may be opening and closing positions for customers, we aren’t actually taking out the original position for a Coinbase.”
“There are arguably too many question marks around Coinbase’s Ethereum staking. It’s a potentially significant moneymaking project, but regulators have to pin down their approach to this stuff to make it an investable quality.”
Confusion re: changes in fees and services
Coinbase customers also seem to frequently wind up confused by changes at the company.
This Reddit thread featured Coinbase customers wondering why network fees changed so drastically there.
“I’ve been using Coinbase to send and receive btc for about 10 years. Never had a problem until a month ago when I sent $100 of btc. It was confirmed $96 sent. I received $71. A few days later I sent $100. It was confirmed and I never received it. Today I sent $100. It showed $94 sent and I only received $71 again. What am I missing here besides my money? I’ve done this same transaction literally over 200 times and have never had money not show up or not received what was sent.”
“I recently had a terrible experience with excessive fees charged by Coinbase that I wanted to share as a warning to others. I converted around $40,000 USDC to Bitcoin on Coinbase. However, the resulting Bitcoin was only worth around $39,200 — meaning Coinbase charged me about $800 in fees (about 3% fee rate for one single transaction)! The fee amount was exorbitant and not disclosed to me ahead of time. I thoroughly reviewed Coinbase’s trading records and could not find any details on the specific fees for my transaction. As a customer, I have a right to know exactly what fees I’m being charged. The lack of transparency around fees is completely unacceptable.”
“Coinbase has a lot of fees that can eat into any money you’re making, especially if you trade regularly or with significant amounts of cash. There are alternatives to the platform that provide strong returns without debilitating commission rates.”
Conclusion
Sinking reputation
Word is out about Coinbase’s bad reputation. Customers seem especially galled by the company’s poor customer service and its lack of urgency when it comes to solving security complaints.
The result is a loss of trust among Coinbase customers…
Loss of customer trust
Here’s one longtime customer explaining why they’re leaving the platform:
“I have been a long time customer of Coinbase for about 4 years and have put over 125,000 dollars into crypto using the platform. This platform is trash and I will never invest with them again… Good luck talking to their customer service or getting them to help you with anything they will just continue to have you security lock you account out, and tell you if you want them to help you then make a new account with the new number???? from this point on I will be contacting my attorney because this scam platform is stealing my money!!!”
There’s also concern about what would happen if the company were to file for bankruptcy:
“In its quarterly report, Coinbase added a risk disclosure: if the company were to file for bankruptcy, the court might treat customer assets that the exchange is custodian for — their Bitcoin, Dogecoin or whatever — as Coinbase’s assets. And they’d be at the back of the line for repayment, forcing normal people, unaccustomed to the ins and outs of federal bankruptcy court, to claw back their money along with everybody else owed money by the exchange.”
Adam Levitin, a Georgetown University law professor who studies bankruptcy, examined this scenario and wrote, “So what happens to a customer if an exchange files for bankruptcy? I think it ends very badly for the customers.”
Basically, customers would be last in line to recover their money. In fact, they may wind up receiving only pennies on the dollar.
Loss of customer trust has led to industry low Trustpilot reviews…
So, it’s no wonder Coinbase is facing increased competition.
Companies that don’t platform altcoins may have an advantage over Coinbase since it incurs large costs (legal and otherwise) by depending so much on altcoins as a revenue source.
In fact, Coinbase pays users to watch videos about how various kinds of crypto work. Some of these include altcoins cited in an SEC lawsuit. By marketing these rewards, Coinbase actively encourages customers to engage in uncertain investments.
The recent introduction of Bitcoin ETFs may take a toll on Coinbase too.
“Not everyone sees these ETFs as bullish for [Coinbase’s] stock. While Coinbase will benefit from the growth of these products using its brokerage and custody services, ultra-cheap ETFs will challenge Coinbase’s expensive fees for low-value trades.”
Companies that are Coinbase alternatives
As uncertainty surrounding Coinbase intensifies, more alternatives for buying Bitcoin are popping up.
Perhaps the best reason to consider moving to one of these platforms is because Coinbase supports many risky tokens (including some outright scams). Platforms that stay away from these tokens and focus exclusively on Bitcoin (i.e. a well-established, widely accepted digital asset in good standing with the U.S. government) are a safer bet, according to many experts.
While we’re admittedly biased, we suggest using Swan Bitcoin as your platform to invest in Bitcoin. It’s a user-friendly and intuitive platform that simplifies investing in, storing, and learning about Bitcoin.
One reason it’s a great reason to delete Coinbase is its ability to automate Bitcoin purchases at regular intervals, helping create a disciplined, low-time preference investment strategy to build wealth over time.
Give Swan Bitcoin a try and you’ll see why so many Coinbase customers have made the switch.
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Matt Ruby
Matt Ruby is a seasoned content writer helping educate million worldwide about Bitcoin for Swan. Matt work with tech companies to create words, videos, and other content that makes them seem human. He specializes in taking boring/drab tech topics and making them interesting, educational, funny, and accessible to regular people.
Drew
Drew, a class of 2013 Bitcoiner, is a Research Analyst for Swan Bitcoin.
He has worked in institutional VC/PE, FinTech, and DLT consulting for over six years. He also brings over twelve years of experience working with national nonprofits and start-ups in education and software development in several leadership roles.
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