Coinbase Inadvertently Exposed an Inconvenient Truth About Cryptos

With Russian President Vladimir Putin making what NATO Secretary General Jens Stoltenberg condemned as a “reckless attack on Ukraine,” we’ve entered into a new world order. And that will most certainly affect Coinbase Global (NASDAQ:COIN). You can scream all you want about COIN stock being levered to a decentralized ecosystem; the reality is, you’ve got to cash out somehow.

Flags of Coinbase and NYSE flying in the wind.
Source: rarrarorro /

Some of you might recall the shocking and infamous “cheater’s justice” scene from the otherwise excellent film Casino. As you’ll recall — and before I forget, spoiler alert! — the protagonist of the movie witnessed two people colluding to cheat the house: one person was at the blackjack table while his accomplice was signaling the card count via a remote device.

Security came in and zapped the signaler with a cattle prod, which naturally spooked the player. As he went into cash his chips, another security officer intercepted him, sending him into the backroom to visually demonstrate what happens to cheaters: the signaler had his hand broken while the player was given the choice of the hammer or the money.

In this case, I can’t help but think of COIN stock — or any crypto-related venture — as the player. You see, through the use of an accomplice and a remote device, the player decentralized himself from the rules of the house. And through this decentralization, said player made off like a bandit.

But the problem was that the player was rich in a context other than cold hard cash. He had a lot of chips, yes, but he had to cash them out. And that’s where the issue lies with COIN stock.

In most cases, crypto investors can cash out without problem. But every so often, you get a rude awakening. It’s something akin to the awakening Coinbase stock holders have had in the last three months, as COIN stock has lost almost 45% of its value.

COIN Stock Put in Rough Position

Right now, Putin is giving a similar non-choice with Ukraine: sovereignty under the hammer or simply the hammer. This exercise in circular reasoning was one of the reasons I failed as a religious zealot. It was hard to convince people that they needed a solution to a problem that was about to afflict them if they didn’t accept the solution.

In a somewhat similar vein, the assault on eastern Europe highlights an extremely awkward scenario for COIN stock and the underlying crypto market. Plenty of folks who participated in the great virtual currency rally have been made rich — but some of these folks are rich in crypto only.

To be truly rich, you got to cash out. While the blockchain industry has made significant inroads over the last several years, digital assets don’t carry nearly the universal weight and recognition that ardent supporters like to think they do.

A classic example of this circumstance came up during the trucker protests in Canada. Social media posts from platforms including Coinbase advocated self-custody of digital assets. That move turned into a bit of a legal issue as Canadian authorities put sanctions on the protestors.

Again, this action demonstrated the vulnerability of the underlying ecosystem of COIN stock. Yes, Coinbase is an exchange supporting multiple decentralized assets. Theoretically, Coinbase users enjoy multiple options of de-tethering themselves from the fiat money system, including avoiding sanctions.

But the thing is, at some point, you have to cash out, because there simply aren’t enough places, yet, to spend with crypto. Even those who are determined to conduct transactions in crypto land must realize that centralized authorities have found ways to recover high-profile cryptos. Therefore, those who wish to stay off the grid must do so through increasingly exotic assets — assets that command less support.

You Need Some Rules After All

While users within the decentralized ecosystem love waxing poetic about the joys of living away from centralized authority figures, the recent attack on Ukraine demonstrated that at least some authority is necessary for upside viability.

At the most basic level, countries cannot wage war against each other for an underlying economic enterprise to succeed. Put another way, even if you’re trading no-rules cryptos, some rules have to exist, such as traders agreeing not to kill each other. That’s an important rule to follow, I think.

But when you have utter chaos — that is, decentralization from the rule of law — economies don’t tend to work so well. That goes for cryptos too, which is why I’m concerned about COIN stock. It’s getting a rude awakening about certain overlooked vulnerabilities of decentralized ecosystems.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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