[kragen]

Ouch, Coinbase lost over an Instagram this quarter! That sucks.

Is this article implying that they had a long position in cryptocoins? I thought they only held them on behalf of their customers, who were the ones taking the risks, while they reaped transaction fees. Or did they really lose money just because their trading volume fell?

Yields of 10% on bonds maturing in four years is high, but it doesn't imply an overwhelming level of risk.

[nknealk]

I actually think the yield is concerning. For fun, you can plug in your own assumptions to this calculator [0], but with assumptions below, the yield on bonds due 2028 implies a 20% chance of default.

Market price is 0.7/face value of 1/coupon of 3.375 (from the article), payments per year = 1 with 7 payments remaining (you could also do 6, depends on whether they've made a payment this year which I didn't bother looking up), recovery rate of 60% (assumption, the model is really sensitive to this input), and the 5 year treasury rate is around 2.97 percent which I used as the risk free rate.

[0] https://quantwolf.com/calculators/bonddefaultcalc.html

[kragen]

Thank you for quantifying that. I was thinking it meant about a 10% chance of default and about a 10% chance of bankruptcy, and I appreciate the correction.

10% or 20% is "concerning" from some points of view, but what I meant was that creditors still think Coinbase is more likely to be in business 5 years from now than to be bankrupt.

[stevedewald]

They really lost money because their trading volume fell.