By Will McCurdy
2 min read
Famed short seller Jim Chanos had some cutting words about Coinbase’s business model, calling the crypto exchange “symptomatic of the predatory junkyard that is crypto” in an interview with CNBC.
He highlighted the high costs in the industry as being a serious issue going forward, saying “this is a really high-cost industry that needs lots of activity and needs really high commission rates to make money.”
“If you're losing money now, charging retail customers 2.5% a round trip, that’s not a good business model,” he added. The conversation came as part of a wider discussion about the impact of higher interest rates on the U.S. economy.
The American investment manager, who heads up Kynikos Associates, has built a reputation for making bold predictions since his career kicked off in the early 1980s. He’s perhaps most well-known for taking a short position on Enron prior to its 2001 bankruptcy.
Chanos pointed to how Coinbase controls “about 10%” of the global crypto market and burns through “around $1.5 billion” a quarter.
Chanos said if this is representative of the economics of the broader crypto industry then “the crypto universe has a cost of between $50 to $60 a billion on a 1 trillion notional,” he argued.
Chanos’ comments weren’t the only bit of bearish news for Coinbase.
Shares in the firm dropped more than 9.3% as NASDAQ opened, following a profitability warning from Wells Fargo, which alleged rising competition and macro pressures could hurt the company.
Coinbase was also hit hard by the ongoing crypto winter, and its stock has yet to recover from the wider plunge in digital assets of early this year.
The company's market cap currently sits at around $13.88 billion, a stark contrast to its peak of over $75 billion in January 2021.
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