Topic: Goldman Sachs Group lends money to Coinbase backed by bitcoins (Read 310 times)

The only effect it's going to have on anyone is that it's going to keep Coinbase's head above the water.

Yeah... not very attractive news to write about (at least for Coinbase), is it.

"Coinbase gets loan from Goldman Sachs to save it from insolvency"

"Enormous crypto depression forces exchange to get operating loan"

or god forbid:

"Sachs on the brink of second bailout for exchanges"

Yeah, I think it's good
could really see how Bitcoin as a digital asset and currency in the real world are emerging with each other

it does make sense to use for a trend analysis rather than for a day to day staff!

dont try using the UTXO realisation value or the hashrate value window to be looking at the day-by-day stuff trying to find predictive triggers of short term changes.
in short you cant use it to day trade or predict daily movements.

when exchanges have coins in their customer deposits addresses and exchanges move coins to cold store. a few people (whale alert naive followers) think that seeing a movement of 10k btc is a trigger for a massive price spike or crash.. its not.. its just exchanges fiddling about with their wallets.

just use these bits of info to evaluate where the general sentiment of where most people value their coins.
EG (im using random made-up numbers below, just for example, dont quote these numbers below)
 if over 50% of people in the last 18 months are holding coins above $35k .. then over 50% of people are not willing to sell for less than $35k

use this to create a grid of sentiment of how strong the desire is to sell and put that into a gauge of value where if the price was $65k and 98% bought below $50k then thats a strong gauge where nearly everyone wants to sell. meaning the buying pressure is about to die out.

As crypto is on right on the edge of returning to a more modest state, or breaking through it's celing, it's really hard to tell if this is good or not (in the long run), but it was bound to happen as the traditional financial institutions want in on whatever can make money. It's definatelly good for that breaking through the celing i mentioned, but is that wat is overal good for the project, that remains to be seen.

Seems like both unique and advanced approach to analyze btc movements! Thanks to you, I just found and finished reading a good article on UTXO, strongly recommend to others as well. I am not sure if I understood everything correctly, but I completely agree with you, UTXO seems like a much better approach that just looking at some historic prices. Wish I have merits for you, Franky1!

https://medium.com/galaxy-digital-research/price-implications-of-bitcoin-utxo-age-changes-6ec8e1dd6a62

it has absolutely nothing to do with market prices or exchange rates. or historic price data where naive people pretending to be technical analysers just draw trend lines..
(true technical analysis has nothing to do with market price trend analysis)
..
it has everything to do with looking at things like the UTXO realisation rate of a certain time period. and also the mining costs of different regions on the planet.

which is where the value window comes..
taking these measures and then and only then looking at where the price sits within that window shows where good or bad value is of the price. whether bitcoin is cheap or expensive.

i have been doing this many years and the price always fits within the window(of the particular period of time it applies to) because economic, social and general value sentiment causes people to either be in a high buying pressure/ low selling pressure when its cheap and high selling pressure /low buying pressure when its expensive. where at both ends it reaches its bottom and peak when it reaches certain amounts..

.
its why bitcoins 'bottom' is not zero. , for bitcoin to ever 'absolute zero' bitcoin would need to have an unfixable bug where by all asics just give up. something not really ever going to happen from current prospective of reviewing the code and the 13 years of bitcoin functioning.

the bottom could decrease but that would require alot of hashpower switching off
(like 18's window that was $5.6k-$20k but dropped to $3.8k)
(november 2018 hashrate went from 60exa to 38exa)

and yes the hashrate dropped first.. and the price dropped a fortnight after. so its more about watching the hashrate to see the window and where the price value can react within. and then the price reacts within that window after, when that window changes.

Thanks again - very thoughtful! just out of curiosity  - how did you get that window of value?

This isn't some brand new amazing idea, this is a company (coinbase) getting a loan from a bank basically. I mean Goldman Sachs is not a "bank" in the regular sense of the word but they are sort of one, investment bank is the correct wording of it. This doesn't really change anything, if Goldman Sachs believes that they could lend money to ANY business and make money from it then they will do it.

Just because they did it to crypto doesn't mean amazing things for us, I mean banks do lend money to druglords, or even hide their money and launder them for them as well. So at the end of the day, there is nothing shocking here, just a bank trying to profit.

i personally didnt get a loan. i used some spare cash i had and bought in while prices were low.
(i already have a hoard so dont 'need' more btc)
but the low price was too tempting to ignore the opportunity)

bitcoins "value window" of cost to acquire bitcoin on the planet for 2021-2022 via exchanges or blackmarket or mining is $25k-$70k
the $25k is the cheapest mining cost of efficiency on the entire planet. which only a select few can attain.(germany and japan can mine for $69k (they are not mining right now they are instead prefering to buy))
meaning that no one anywhere wants to sell below $25k, but alot of people are happy to buy becasue its cheaper than their regions mining cost
knowing bitcoin can reach upto $70k before the passions of buyers die out (even germans and japanese would still buy at $70k because they cannot mine it for less than $69k/coin)

thus this window of value of $45k spread. shows that the price is in the cheap 8th of value
25 30 35 40 45 50 55 60 65 70
|||||||||||||||||||||||||||||||||||
    ^

(note Q2 2022 is more like $27k-$90k. but im using a historic reference of past 18 months for risk adverse reasons)

So my guess is that a bunch of financial guru from coinbase made a good homework by predicting btc at 60k sometimes soon... I hope    Thanks for your post!

when doing a loan backed by BTC. the best time to do it is when the BTC is cheap.
why..

lets use small numbers.
imagine they want a loan for $3m

if the BTC price was $60k they would lock up just 50btc for the loan. BUT
if the price then dropped to $30k. they would need to:
a. give the bank another 50btc which:
    a1. they also bought/acquired  in the past at $60k a coin rate.
          meaning $6m of acquisition cost btc locked up for a $3m loan(bad)
   a2. had to buy another 50btc at $30k ($1.5m)
          meaning $4.5m of acquisition cost btc locked up for a $3m loan(bad)
or
b. risk defaulting and losing the initial 50btc locked and still owing the bank half the loan amount in cash.

however
if the BTC price was $30k they would lock up just 100btc for the loan(its not sold or lost. its just locked). BUT
when the price goes up to $60k. the bank would need to give the coinbase 50btc and coinbase is still able to play with the $3m (risk reduced)

..
the advantages of doing a loan now is not that they are money poor. its that while btc is cheap. they do not want to be 'selling' btc. or using their current cash reserves.

instead by locking up BTC. (its not sold. nor are they forced to pay cash). .. instead they get cash. which they can use to buy more btc(while its cheap).

and then when btc price goes to $60k, that $3m loan(used to buy 50 extra btc) becomes $6m of value in coinbases favour.. which coinbase can sell 25btc($3m) to then pay off the $3m loan. which then unlocks the 100btc collateral back to coinbase. and be sitting pretty with 125btc. (risk reduced)

I would like to thank everyone participated in this discussion. I believe it was intellectually stimulating for all participants.

I hope that Coinbase will not go bankrupt and if it happens, it may create another "Luna" effect on current already unstable market. However, if survives, the fact that such a big lender was willing to lend money backed by btc may encourage other smaller lenders and borrowers to do the same and this will further enhance the adoption of btc into everyday life. 

Have a great the rest of the weekend!

Yes, they are earning a lot but they are spending a lot too for their service maintenance, loan interest and other miscellaneous expenses common in big businesses like them. Their profit is solely relying on crypto market price since their assets are in crypto. I think the recent report of coinbase that they are losing profit and shares is what Ognasty referring to his statement.

https://www.usatoday.com/story/money/2022/05/11/coinbase-bankruptcy-risk-crypto/9736901002/

It is black and white before they've given that loan, it means that the company is making money and they wouldn't just handed it even if the business name is Coinbase, they have to look at its financial reports that includes the summary of its yearly income reports.

The interest is the main thing on this loan from GS and they know that Coinbase can really keep it up unto the agreed terms.

Yeah, business as usual.

That referral at the end of your shared link isn't really that needed.

I don't know what is happening to Coinbase internally but this loan was their long term plan. I guess it was way expected considering this market isn't favorable not just in crypto but to traditional market as well.

Why would they need money? They are offering a lot of services including their exchange service, payment processor and more and considering their popularity and huge volumes I'd say they are making a ton of money every second.

Business as usual even this one do talks or connects out with Bitcoin but GS wont really be that dumb enough on letting Coinbase on getting some loan without having that assurance or security.

Since we know on how this crypto market had become this big or way too far then it do really pass up on the standards which they had considered out on granting some loan.

Coinbase does know that they could minimize possible loan payment if ever they would really be making more profits on the bitcoins that they've been holding.

They know that Coinbase is one of the top crypto-exchanges, hence, they have no problem making a business deal with them. We don't need to know about their payment terms but of course, they know what's in stake here. At the end of the day, it is all business so they already studied their financials here. If they have confidence in giving them loan, it means, they believe in crypto business. Without positive assessment from their calculated risks, I don't think they will lend money to Coinbase. So they are seeing positive here.

Just another loan or investment probably and to start a relationship for better future on terms of business.

Agreement wasn't shared and of course, it's a business matter and GS won't give them loan if they know that Coinbase isn't as popular as they are now.

So, that's $183 M of loan last year, Coinbase don't want to cash out those bitcoins they hold so they loan and for sure, they all have means of paying it based on their terms.

One centralized entity is investing in another centralized entity! What's the big deal here? Coinbase is a market listed company and if Goldman Sachs thinks that Coinbase will do great in future, they don't have any issue in investing there. It's all fine as both of this Goldman Sachs and Coinbase belong to the same league. One deals in fiat and another one deals in cryptos, but both are centralized in nature, like brothers! I frankly don't see any impact on the defi projects. neither good nor bad!

Well, Coinbase did say they were going to hold their Bitcoin.  I guess with the recent collapse of Luna and the altcoin market, Coinbase is in need of some funds (their stock price certainly indicates this).  Rather than sell their BTC and crash the market further, they're taking a loan out against their BTC.  This is pretty much the last resort before bankruptcy I feel like.  I know I wouldn't be leaving any BTC on Coinbase right now...  I locked some ETH into their 2.0 contract and now I'm concerned if I'll ever see that again.  Coinbase has been around a long time, but it seems like their recent business decisions are playing with fire and risking insolvency. 

I am really surprised by how far the price of Coinbase has dropped since it was floated. It's nice to see that there are wall street giants who are coming in and understanding what a money making machine this sort of exchange can be. Like it or not, for widespread adoption of Bitcoin and other cryptocurrencies to happen it is going to require a few big exchanges where the average person can feel safe storing their "virtual tokens" over a long time period. Many have no interest in learning all the intricate details or holding their own private wallets like some here might advocate. On that note Coinbase rakes in a lot of fees and maybe need to reduce those, that is why they are looking like such an attractive investment target right now.

Does anyone know the history of the borrowing? Determine whether it was before the interest rate hike and the bitcoin price drop, or before that? What does a loan paid in bitcoin mean?

If I want to borrow $30,000 and say I put Bitcoin as collateral, will lenders treat Bitcoin as an asset or because of its price? If the price drops to 10,000, I will be asked to put 2 additional bitcoins as collateral?

It is not just potentially good. It is good. It means that there is already a growing recognition of Bitcoin in Wall Street. If a bank as large as Goldman Sachs lends away millions in USD with Bitcoin as collateral, it means only one thing: that Bitcoin is valuable. You cannot use it as a collateral if the bank doesn't find it valuable. So this is really good. And since Goldman Sachs is now doing it, smaller banks will definitely be watching with focus and eventually do the same. 

It will have 0 impact on De-Fi

As for what it will do in general, hard to say. It's looks like any other asset backed loan. So you get better interest rates since they have a hard asset to sell if you default.
Probably good for both companies. GS gets to make a low-ish risk loan and CB gets financing with better rates then the open market / bond sale type thing.

-Dave

Sounds good in theory, but time will tell. It would show a great sign to the markets if bitcoin held decently throughout the duration; and on the other hand it would be catastrophic bad news if bitcoin ended up having a couple of long lightsaber-ish red candles, ending up having the BTC to be liquidated.

Goldman Sachs Group lends money to Coinbase backed by bitcoins bringing money from the Wall Street to the digital-asset space

https://www.bloomberg.com/news/articles/2022-05-03/coinbase-is-on-other-side-of-goldman-s-first-bitcoin-backed-loan?sref=fgHqaWRV

Trying to open up some discussion here - do you believe that this news is potentially good one for crypto and for Defi projects as well?