Crypto

Coinbase Embodies ‘Predatory Junkyard That Is Crypto’: Enron Short Seller Jim Chanos

Famous short seller Jim Chanos had some sharp words about Coinbasecalling the crypto exchange “symptomatic of the predatory heist that is crypto” in an interview with CNBC.

He pointed to the industry’s high costs as a serious issue for the future, saying “this is a very expensive industry that needs a lot of business and needs commission rates very high to make money”.

“If you’re losing money now, charging retail customers 2.5% per round trip, that’s not a good business model,” he added. The conversation was part of a larger discussion about the impact of higher interest rates on the US economy.

The American investment manager, who runs Kynikos Associates, has built a reputation for making bold predictions since he began his career in the early 1980s. He is perhaps best known for taking a short position in Enron before its bankruptcy in 2001.

Chanos pointed out how Coinbase controls “about 10%” of the global crypto market and burns “about $1.5 billion” per quarter.

Chanos said that if this is representative of the economics of the broader crypto industry, “the crypto universe has a cost of between $50 billion and $60 billion out of a $1 trillion notional,” he explained.

Coinbase shares take a hit

Chanos’ comments weren’t the only bearish news for Coinbase.

Shares of the company fell more than 9.3% at the NASDAQ open, following a profitability warning from Wells Fargo, which alleged that growing competition and macroeconomic pressures could hurt the company.

Coinbase has also been hit hard by the ongoing crypto winter, and its stock has yet to recover from the broader drop in digital assets earlier this year.

The company’s market capitalization currently sits at around $13.88 billion, a stark contrast to its peak of over $75 billion in January 2021.

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