Ripple (XRP)–Coinbase and Ripple have been closely tied since the price of XRP tanked in early January following an announcement by the app-friendly exchange that they would NOT be releasing new coins in the near future. More recently, XRP has had to deal with another price drop related to Coinbase, this time in the form of Ripple CEO Brad Garlinghouse appearing on CNBC alongside Coinbase’s COO Asiff Hirji. Internet speculation led to another pump in XRP price that was again sunk by a Coinbase announcement against a possible Ripple listing.
At this point, Ripple investors and enthusiasts are growing weary of the constant price tug-of-war between XRP and Coinbase over rumors of the possible addition. In favor of Ripple, the currency will soon be listed on the massive, banking-backed exchange SBI Virtual in Japan, which could herald similar levels of adoption to what Coinbase’s 13 million-strong user base offers. But it’s worth questioning: why is Coinbase so against listing Ripple’s XRP?
Let’s look at the facts:
Coinbase is one of the oldest exchanges in the cryptomarketplace, having been in operation since 2012. However, despite being on the market for nearly six years, Coinbase offers four currencies for customers to buy and sell: Bitcoin, Litecoin, Ethereum and Bitcoin Cash. BCH is the most recent addition to Coinbase, having been listed amidst controversy in December 2017. Even then, the addition of Bitcoin Cash was a bit of an anomaly: BCH is a hard-fork of BTC which has managed to gain greater traction than others like Bitcoin Diamond and Bitcoin Gold. Following the fork of BCH in August 2017, Coinbase promised customers storing their Bitcoin on the exchange that they would be credited with an equal amount of BCash. This was a reasonable move by Coinbase–customers would have been due their coins if they had held them in independent wallets, and the alternative would have given the appearance that Coinbase was essentially stealing customer BCH tokens. While the Bitcoin Cash listing was originally intended as a goodwill move on behalf of Coinbase, the end result was total disaster: rumors leaked from Coinbase employees about the BCH listing, leading to a 24 hour price run that crashed GDAX (Coinbase’s trader-friendly exchange) and shot the price of BCH from 2400 USD to 3900 USD and back again. Coinbase is still reeling from the ramifications of that event, with multiple lawsuits pending against the company over allegations of insider-trading.
Undoubtedly, the primary reason Coinbase has been slow to add any new currencies to their exchange is fear over a similar backlash as what occurred with Bitcoin Cash. Coinbase is in a lose-lose position when it comes to adding new currencies. While each coin addition to the exchange is another potential source of thousands per day in transaction fees, it comes at the cost of hurting the Coinbase brand and product. There is no clear path for the company to list new currencies without creating the scenarios for another price run and possible insider-trading allegation.
No matter how hard Coinbase tries, a silent listing will inevitably lead to employees getting the rumor out to friends and families, which will cause enough of a price-stir to draw the attention of the rest of the market. Case and point is Bitcoin Cash. No one knew for sure when BCH would be listed on Coinbase–the company merely said it would occur before the start of 2018–however, the steady increase in BCH valuation in the 24 hours leading to the listing were clear for any industry follower. In another scenario, Coinbase could try announcing a handful of currencies they intend on listing, such as XRP, DASH and IOTA, without giving a hard date for any individual launch. Even in this vague listing example, Coinbase runs the risk of missing out on millions in user transactions fees. Picture this: Coinbase announces a collection of currencies that will be listed in the near future. Investors rush to other exchanges and begin buying handfuls of the new currencies. By the time they drop on Coinbase, the price has become so inflated that few investors are willing to purchase at the bloated price. Now, despite giving customers the opportunity to buy new coins, all Coinbase has accomplished is generating massive fees for rival exchanges while hurting their loyal user base with overvalued currencies.
If anything, it’s understandable why the group at Coinbase would be so hesitant over adding Ripple. There could be a strong desire within the company to offer XRP to customers, but the details of implementation are complex and often lead to negative consequences for Coinbase and Coinbase users. It might be best at this point for both communities to quietly go their separate ways, until a feasible method for implementing XRP becomes available to Coinbase. Ripple investors are growing annoyed, to say nothing of the negative impact upon XRP valuation, by the pump-and-dump effect of Coinbase rumors. Likewise, Coinbase is having to respond to unfounded claims of a potential Ripple partnership, which takes away agency and attention from their company’s legitimate goals, while also drawing further accusations to future insider-trading schemes.
There are two internet conspiracies that give another reason for Coinbase failing to list XRP, despite the coin residing in the top 3 of crypto market capitalization, both concluding the culture within Coinbase is decidedly anti-Ripple. The first stems from a belief that Coinbase brass and investors are large proponents of Bitcoin and have large holdings in BTC, therefore are unwilling to make business moves that improve XRP price while also eroding Bitcoin dominance. The second rumor concerns the criteria listed on Coinbase’s website for the addition of new currencies: that they are only interested in adding cryptocurrencies which fit the mold of “decentralized.” Ripple has created a fair amount of stir in the cryptospace over whether or not the XRP token is actually a decentralized currency. While most have come to agree that XRP is in fact decentralized, it’s undeniable that Ripple, the parent company, holds a massive amount of the currency (around 55 billion XRP)–even if those coins are locked up in escrow for the next five years.
Let’s address the first rumor, that Coinbase is made up of Bitcoin fanboys afraid of causing any harm to their favored currency. Remember that we are talking about a potentially trillion-dollar industry in cryptocurrency, that would far exceed the valuation of owning a stack of Bitcoin. Coinbase is in the rare position to shape the face of crypto in the coming years, particularly for US and Western based customers that do the majority of their cryptocurrency purchasing through the phone app. It would be remiss for Coinbase, as a company, to miss out on the massive gains to be made through other coin listings out of an allegiance to the original Bitcoin. Not to mention, BTC pricing has largely done fine independent of Ripple. Bitcoin was able to achieve an all time high of 19000 USD separate from XRP price movements, and will most likely do so again.
As for whether Coinbase holds some moral high-ground adherence to decentralized cryptocurrencies: again, it’s possible, but unlikely. The ultimate goal for Coinbase is to eventually IPO and become a publicly traded company. That means increased profits and revenue are the number one priority for the company, in addition to growing their user base. More currencies, particularly ones that are demonstrating top of the market transaction volumes, equates to a substantial boom in fees in addition to generating more users. Outright adding XRP is a benefit for Coinbase in nearly every way, but it’s getting over the hurdle of listing that presents the greatest problem.
Even as a Ripple enthusiast, it is clear to see the Catch-22 that Coinbase is caught up in over adding any new currencies. It seems doubtful that the company has any ill will towards Brad Garlinghouse and Ripple, and indeed there has likely been conversations between the two over an eventual XRP listing. But the means for doing so is inadequate at this time.