A $225 million popular trading floor is having a huge impact on the entire crypto market.
With the increasing global warming of Bitcoins and cryptocurrency, so many pre-coded exchanges are opening to meet the needs of investors. While trading floors are an intermediary for investors to buy and sell crypto currency, no one is sure that a trading floor possesses so much power and can have a strong impact on the crypto market.
That is Coinbase, the largest and most popular trading platform in the US, even supports only four codecs Bitcoin, Ethereum, Litecoin and recently Bitcoin Cash. Investors around the world have been spreading something called the “Coinbase effect,” and this effect can make a crypto growth boom in a short time.
Bitcoin Cash is the latest crypto added by Coinbase on its trading floor and has had a tremendous impact. About two minutes after the opening of the Bitcoin Cash transaction on Coinbase, the price of the crypto currency increased from $3,500 to $8,500.
Coinbase’s total trading volume climbed to $1.5 billion in 24 hours, pushing Coinbase from No. 15 to No. 7 in trading volume, according to Coinmarketcap. The strength of Coinbase is its ability to reach out to high school investors, amateurs, Uber drivers, or salespeople in the mall.
Coinbase is like a starter station for anyone intending to enter the crypto market and invest in Bitcoin. Although there are a lot of Coinbase exchanges in the US, such as Gemini, Kraken or the trading platform of the twins Winklevoss. But no trading platform is as powerful as Coinbase.
Coinbase effect and power impact on the market
According to Ari Paul, an investor and co-founder of BlockTower Capital, the Coinbase effect has been seen before. In May, when Coinbase announced it would take Litecoin to its trading floor, the value of the crypto currency immediately increased 30%.
It is worth noting that Litecoin had doubled its value in a short period of time and investors were expecting a slight correction. But no, as soon as Coinbase reportedly supported Litecoin, the currency continued to rise.
Similarly, Ethereum also rose 14% on its first day of trading on Coinbase in July 2016. Ripple (XRP) have also grown strongly, though only rumors have it that Coinbase will be available in early 2018.
This shows that any coded currency will grow strongly when it is on the Coinbase, or simply rumors related to Coinbase. Investors call it the “Coinbase effect,” although it is not based on a financial rule.
Although there is a basis for that growth, when a currency codename becomes more popular by reaching out to more popular and easy-to-buy investors. But the impact of Coinbase on Bitcoin Cash is unprecedented.
With a capital investment of just $225 million, Coinbase is showing its huge impact on the crypto market capitalized at $550 billion. In particular, Bitcoin Cash’s recent storm surged 110 percent in two hours and then went up another 180 percent to a record $8,500, three times the average price of other exchanges.
Is Coinbase manipulating the market?
Although it’s just a middleman, it seems Coinbase is shady to manipulate the market based on its power. Many investors have suspected Coinbase as a price that makes Bitcoin Cash rise sharply, to profit.
There were a number of signs that Coinbase has announced on August 3 that it will begin hosting Bitcoin Cash on Jan. 1. But on Tuesday, Coinbase unexpectedly opened Bitcoin Cash earlier than expected.
This move has led many investors to transfer their Bitcoin Cash to Coinbase. But then, Coinbase announced canceling the transaction due to the large number of hits. Some alleges that Coinbase prevented the sale and limited Bitcoin Cash to raise prices.
That also caused Bitcoin Cash to be pushed up to $8,500. However, Coinbase later said it had stopped trading Bitcoin Cash to investigate employee insider trading. In their announcement, Coinbase said some employees had used internal information about the launch of the Bitcoin Cash trading platform earlier than expected for profit.
But in fact there is no legal entity conducting investigations into Coinbase operations. It may be that this trading floor has directed everything, then blamed an unnamed employee. No one can verify the truth.
Certainly many people have benefited from the sudden increase in Bitcoin Cash prices. And in the future, this scenario can be repeated with other crypto currencies as Coinbase-related information emerges.
When the crypto market is only developing its first steps with a market capitalization of just $500 billion, there are forces that can easily manipulate the market. Meanwhile, retail investors are still suffering.