One of the key features of blockchain technology is decentralization. The idea here is to rule out a single point of failure. However, recent research showed that Coinbase has custody of a big amount of $BTC.
In the unlikely case that Coinbase would get hacked, we could have a serious black swan event at our hands. They’re custodians for at least four big entities. So, let’s see, who picked Coinbase as their $BTC custodian.
Why Pick Coinbase as Your $BTC Custodian?
Well, crypto custodians have become a regular household in the crypto sector. However, few custodians can hold huge amounts of $BTC. Coinbase is one of the few that can hold such enormous amounts. This results in various reasons why Coinbase is a popular choice. So, let’s take a look at these.
- Regulatory pressure — The current US government is not very crypto-friendly. Although, that’s almost an understatement. The SEC keeps going after various crypto firms, even though they already lost a few cases. You can also argue that there’s a lack of clear regulation coming from the SEC.
- Fewer crypto-friendly banks. — The US government has taken down plenty of crypto-friendly smaller banks. This is one of the main features of Choke Point 2.0. As a result, there are fewer options available.
- Self-custody — This would be a good option but carries certain risks. For example, private key management.
Here are various big entities that use Coinbase as their $BTC custodian. This totals 2.2 million $BTC that Coinbase looks after. That’s more than 10% of the total $BTC supply. See the picture below.
Source: X
1) $BTC spot ETFs and ETPs
There are 17 $BTC spot ETF and ETP firms that use Coinbase as their custodian. Fidelity is the only $BTC fund that currently has self-custody. ETPs are Exchange Traded Products. Plenty of companies that offer them also use Coinbase as custodian. They total 806,619 $BTC.
Source: X
2) MicroStrategy and CEXes
Microstrategy is only one of a few firms that have their $BTC in Coinbase’s custody. Tesla and SpaceX do so as well. MicroStrategy has 79,296 $BTC in custody. All three have 99,091 $BTC in custody. For CEXes, Coinbase, Revolut, and Bitvavao have 1,105,318 $BTC in custody.
Source: X
3) US Mining Companies
Four US $BTC mining companies use Coinbase as their custodian. Hut8, CleanSpark Inc., Cipher Mining, and Bitfarms. Together they’re good for 17,609 $BTC.
Source: X
Conclusion
It turns out that Coinbase is the $BTC custodian for quite a few big firms. This makes them a potential single point of failure in case of a hack. We have looked at some of the firms that use them as a custodian.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers, and their risk tolerance may be different from yours.
We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.
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