Is Coinbase in Trouble? 4 Reasons to Avoid Coinbase in 2024 (July Update) (2024)

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Coinbase isfacing all kinds ofproblems. Isittime for customers toseek out analternative inJuly of2024? Wethinkso. Let’s talk about the top 4 reasons toavoid Coinbase!

Coinbase, the largest U.S.-based crypto trading platform, isfacing obstacles inthe form ofhostile regulators (including the SEC, which sued the company), data breaches, disgruntled customers, and technical glitches.

Plus, it’s facing new competition from fund companies andbrokerages. Asaresult, the future ofthe platform isviewed bysome asuncertain…

This piece will explore the company’s challenges and why some investors are seeking out aCoinbase alternative.

The rise ofCoinbase

With tens ofmillions ofusers, Coinbase isone ofthe most widely used online cryptocurrency exchanges, ahead ofKraken and amany others.Customers use ittobuy Bitcoin, Ethereum and Solana along with over 120 other different types ofcryptocurrencies.

During the fourth quarter of2023, the company saw its revenues rise 41% quarter over quarter to$954 million, while the stock price jumped close toatwo-year high.

Sounds like good news for the platform, right?

Well, holdon…

Recent controversies

Coinbase keeps finding itself inhotwater. For starters, it’s repeatedly found itself the target ofgovernmentregulators. The U.S. Securities and Exchange Commission (SEC) launched amajor lawsuit against Coinbase, claiming itoperated asanillegal securities exchange, broker, and clearingagency.

Coinbase was also levied a$50 million fine tosettle allegations from New Yorkregulators. The regulators found Coinbase broke the law bynot doing enough toprevent money laundering onits platform.

• “Coinbase failed tobuild and maintain afunctional compliance program that could keep pace with its growth, ” AdrienneA. Harris, New York’s superintendent offinancial services, said inastatement. “That failure exposed the Coinbase platform topotential criminal activity requiring the Department totake immediate action.”

UPDATE: OnWednesday, March 27th the U.S. SEC scored abig win against Coinbase. Ajudge ruled that the SEC’s claim that Coinbase has engaged inthe sale ofunregistered securities could beheard byajury attrial.

Meanwhile, there have also been widespread issues with how Coinbase treatscustomers…

Poor customer support

Long wait times toget support

According tomany dissatisfied customers

• Getting help from Coinbase requires extensive time and effort.

• Former Coinbase employees have even admitted that the support department struggles tokeep upwith demand.

Infact, customers often wait days before getting aresponse.

It’s not shocking then that when CNBC found thousands ofcustomer complaints against the company.

• One major sticking point has been apattern ofaccount takeovers that steal funds, followed byineffective 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 lossestoo.

Add inlegal fees, and you can see why customers are frustrated.

• “Most people who contact mewould tell you it’s poor customer service,” said David Silver, anattorney focused oncryptocurrency.”

• “They’re being almost victimizedtwice. Because they themselves have almost noability tocontact Coinbase and deal with them directly, they’re forced toretain professionals.”

Difficulty incontacting support

The Better Business Bureau determined that Coinbase has a“Pattern ofcomplaints from customers who state they are locked out oftheir accounts, even after providing required information orupdates.”

The BBB received 3,339 complaints about Coinbase over the last 11 years.

Coinbase’s “disastrous” customer service has also come upfrequently ontech news site Hacker News. Here’s one example:

• “I’ve been waiting for over five months for Coinbase tounlock myaccount and allow metoaccess myfunds. I’ve never experienced oreven heard ofsuch along wait time for action tobetaken onanopen customer support ticket and Ihonestly have noidea how toproceed.”

You can find similar statements onReddittoo.

• “I’ve been trying toconnect mybank [account] soIdon’t keep having todowire transfers…It’s costing melots ofmoneyand… Ihave got atleast 3 ticketstotal. They just keep giving methe run around and closing unresolved tickets!”

And Coinbase’s iffy support has also been atopic ofdiscussion onQuora.

• “Some users have reported that Coinbase’s customer support can beslow torespond orunhelpful incertain situations, particularly during times ofhigh demand ormarketvolatility. Coinbase has acknowledged these issues and has been working toimprove its customer support byhiring additional support staff and improving its support systems.”

Plus, there have also been technical issues reported atthesite…

Technical issues

Frequent system crashes

System crashes have been anissue for Coinbase too.

• When the company ran aSuper Bowl ad, itgenerated 20 million hits, temporarily crashing thesite. Another time, Coinbase went down during abig pump day forBitcoin.

• OnFebruary 28th, 2024 Coinbasesufferedanotherglitchthat left many users seeing azero balance intheiraccount. This crash happened again during a+10% price pump day for Bitcoin.

Coinbase status page

TheCoinbase status pageisused tocommunicate any issues with their products, including planned and unplanned outages.

• According tothe Coinbase Status page, the Coinbase exchange experiences anoutage issue nearly every singleday.

Delayed transactions

There have also been reports ofdelays incompleting transactions atCoinbase. The company explains:

• “Our nodes may lose sync with the rest ofthe network for short periods oftime, which can cause transactions toremain pending longer thannormal. Usually the delay isunder anhour and the transaction will eventually gothrough normally.”

Inthe past, the company also reported delays indeposits and withdrawals onits Stellarplatform.

Another time, Coinbase stopped transactions for U.S. users for over five hours due toanissue preventing the company from processing withdrawals ordeposits involving bank accounts:

• “Weare currently unable totake payments ormake withdrawals involving U.S. bankaccounts. Our team isaware ofthis issue and isworking ongetting everything back tonormal assoon aspossible, ” Coinbase explained onits statuspage.

Issues with withdrawals

Also, Coinbase customers have frequently complained about unexplained account closures and stalled withdrawal requests onReddit.

• “The past week has seen arising number ofCoinbase customers complaining onthe exchange’s Reddit forum about their accounts being closed without any explanation. Many ofthese complaints include quotes from Coinbase that refuse todivulge the justification behind the closures, insome cases citing ‘a variety offactors, ’ all ofwhich gounexplained due to‘security reasons.’

The explanations Coinbase gives are lackluster.

For example, the company has prevented individuals from converting their assets tofiat cash, stating that “Wecan nolonger continue our banking relationship.”

Pressed for details, Coinbase responded itwas “Unable toelaborate onour process for this.” Nowonder customers wind uppeeved.

Failure toprotect user funds

Infact, Coinbase repeatedly avoids responsibility for securitybreaches.

After security breach ishis problem, suit claims:

• “Coinbase Global Inc. says it’s not responsible for losses stemming from asecurity breach, according toanaccount holder who sued inanattempt torecover $96,000 that hesays was stolen fromhim. Jared Ferguson ofStaten Island, New York, claims hereceived atext from his mobile carrier inMay describing aSIM card change request that hehadn’tmade. When herestored service tohis iPhone the next day with anew card, Ferguson said helearned that almost his entire life savings was gone from his Coinbase account.”

Lack oftransparency

Poor communication with customers

Asmentioned previously, communication with customers isfrequently cited asasore spot atCoinbase.

• Complaints ofpoor customer service frequently make the rounds onsocial circles (mainly Reddit and Twitter), with users commonly claiming late responses ontheir service tickets, among otherconcerns.

Why has this been anongoing issue? The rapid growth atCoinbase may betoblame:

• AsCoinbase grew, projects started tofeel overstaffed, and the decision-making process slowed amid layers ofbureaucracy, according tofive people familiar with thecompany. Longtime employees were concerned that new hires felt “rudderless, ” one person said, and joked that you could tell the length ofsomeone’s tenure atCoinbase bythe number oftimes the new recruits came tothem asking forhelp.

Coinbase highlights why Bitcoin cold storage issoimportant.

Confusing policies and procedures

The company has also come under fire for its unclearpolicies.

According toanSEC complaint, Coinbase has made billions ofdollars unlawfully facilitating the buying and selling ofcrypto assetsecurities. The SEC alleges that Coinbase intertwines the traditional services ofanexchange, broker, and clearing agency without registering any ofthose functions with the Commission asrequired bylaw.

In2021, the Commodity Futures Trading Commission issued anorder against Coinbase for “reckless false, misleading, orinaccurate reporting aswell aswash trading byaformer employee onCoinbase’s GDAX platform.”

The order required Coinbase topay acivil monetary penalty of$6.5 million and tocease and desist from any further violations ofthe Commodity Exchange Act orCFTC regulations.

• “Reporting false, misleading, orinaccurate transaction information undermines the integrity ofdigital asset pricing, ” said Acting Director ofEnforcement Vincent McGonagle atthetime.

Confusion also surrounded Coinbase’s entry into the marketing ofcryptocurrency futures.

See: Coinbase Clarifies Crypto Shorting Confusion: “It’s Only For Our Clients, ”

• Following the recent announcement ofCoinbase’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 ofsuch technology not only toenhance corporate revenue but also asaprovider offuturescontracts.

Coinbase’s Garrett Balliett tried toput out the fire with this explanation:

• “Weoffer derivatives and futures products toour clients and institutional aswell, particularly institutional clients that doprovide thoseservices. But it’s somewhat conflated because that isn’t also the same asusactually taking out those positionsourselves. But while wemay beopening and closing positions for customers, wearen’t actually taking out the original position for aCoinbase.”

There were also questions around Coinbase’s policies re: Ethereum staking:

• “There are arguably too many question marks around Coinbase’s Ethereumstaking. It’s apotentially significant moneymaking project, but regulators have topin down their approach tothis stuff tomake itaninvestable quality.”

Confusion re: changes infees and services

Coinbase customers also seem tofrequently wind upconfused bychanges atthe company.

This Reddit thread featured Coinbase customers wondering why network fees changed sodrasticallythere.

• “I’ve been using Coinbase tosend and receive btc for about 10years. Never had aproblem until amonth ago when Isent $100 ofbtc. Itwas confirmed $96sent. Ireceived $71. Afew days later Isent $100. Itwas confirmed and Inever receivedit. Today Isent $100. Itshowed $94 sent and Ionly received $71again. What amImissing here besides mymoney? I’ve done this same transaction literally over 200 times and have never had money not show up*rnot received what was sent.”

Another Reddit thread advised, “Beware Coinbase’s outrageous hidden fees.”

• “Irecently had aterrible experience with excessive fees charged byCoinbase that Iwanted toshare asawarning toothers. Iconverted around $40,000 USDC toBitcoin onCoinbase. However, the resulting Bitcoin was only worth around $39,200— meaning Coinbase charged meabout $800 infees (about 3% fee rate for one single transaction)! The fee amount was exorbitant and not disclosed tomeahead oftime. Ithoroughly reviewed Coinbase’s trading records and could not find any details onthe specific fees for mytransaction. Asacustomer, Ihave aright toknow exactly what fees I’m beingcharged. The lack oftransparency around fees iscompletely unacceptable.”

Wealthsimple offered this advice re: Coinbase fees:

• “Coinbase has alot offees that can eat into any money you’re making, especially ifyou trade regularly orwith significant amounts ofcash. There are alternatives tothe platform that provide strong returns without debilitating commission rates.”

Conclusion

Sinking reputation

Word isout about Coinbase’s badreputation. Customers seem especially galled bythe company’s poor customer service and its lack ofurgency when itcomes tosolving security complaints.

The result isaloss oftrust among Coinbase customers…

Loss ofcustomer trust

Here’s one longtime customer explaining why they’re leaving the platform:

• “Ihave been along time customer ofCoinbase for about 4 years and have put over 125,000 dollars into crypto using theplatform. This platform istrash and Iwill never invest with themagain… Good luck talking totheir customer service orgetting them tohelp you with anything they will just continue tohave you security lock you account out, and tell you ifyou want them tohelp you then make anew account with the new number???? from this point onIwill becontacting myattorney because this scam platform isstealing mymoney!!!”

There’s also concern about what would happen ifthe company were tofile for bankruptcy:

• “Inits quarterly report, Coinbase added arisk disclosure: ifthe company were tofile for bankruptcy, the court might treat customer assets that the exchange iscustodian for— their Bitcoin, Dogecoin orwhatever— asCoinbase’sassets. And they’d beatthe back ofthe line for repayment, forcing normal people, unaccustomed tothe ins and outs offederal bankruptcy court, toclaw back their money along with everybody else owed money bythe exchange.”

Adam Levitin, aGeorgetown University law professor who studies bankruptcy, examined this scenario and wrote, “Sowhat happens toacustomer ifanexchange files forbankruptcy? Ithink itends very badly for thecustomers.”

Basically, customers would belast inline torecover theirmoney. Infact, they may wind upreceiving only pennies onthedollar.

Loss ofcustomer trust has led toindustry low Trustpilotreviews…

Coinbase Trustpilot Reviews

Trustpilot Rating: 1.9 / 5 from 9,351 reviews
Apple Store App:4.7 / 5 from +1.7M reviews (#13 inFinance)
Google Play Store:4.5 / 5 from +838k reviews, +10M downloads

Competition from other platforms

So, it’s nowonder Coinbase isfacing increased competition.

Companies that don’t platform altcoins may have anadvantage over Coinbase since itincurs large costs (legal and otherwise) bydepending somuch onaltcoins asarevenuesource.

Infact, Coinbase pays users towatch videos about how various kinds ofcryptowork. Some ofthese include altcoins cited inanSEC lawsuit. Bymarketing these rewards, Coinbase actively encourages customers toengage inuncertain investments.

The recent introduction ofBitcoin ETFs may take atoll onCoinbase too.

• “Not everyone sees these ETFs asbullish for [Coinbase’s] stock. While Coinbase will benefit from the growth ofthese 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

Asuncertainty surrounding Coinbase intensifies, more alternatives for buying Bitcoin are popping up.

Perhaps the best reason toconsider moving toone ofthese platforms isbecause Coinbase supports many risky tokens (including some outright scams). Platforms that stay away from these tokens and focus exclusively onBitcoin (i.e. awell-established, widely accepted digital asset ingood standing with the U.S. government) are asafer bet, according tomany experts.

While we’re admittedly biased, wesuggest using Swan Bitcoin asyour platform toinvest inBitcoin. It’s auser-friendly and intuitive platform that simplifies investing in, storing, and learning about Bitcoin.

One reason it’s agreat reason todelete Coinbase isits ability toautomate Bitcoin purchases atregular intervals, helping create adisciplined, low-time preference investment strategy tobuild wealth over time.

Give Swan Bitcoin atry and you’ll see why somany Coinbase customers have made theswitch.

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