Can You Trust Coinbase & GDAX? An Honest Review

Note: I will respond to most relevant comments if you are interested in engaging. Thank you for watching / reading.

Coinbase / GDAX launched support for Bitcoin Cash out of the blue yesterday and caused a flash crash in Bitcoin and a massive rally in Bitcoin Cash. Is Coinbase / GDAX stupid, or is there a more malicious intent? There are some rumors going around that there was insider trading and intentional manipulation of the market.

The evidence supporting this is from the multiple coincidences surrounding the launch such as:

  1. Recent Bitcoin Difficulty Adjustment
  2. Bitcoin Cash Price Spiking Prior to Announcement
  3. Roger Ver on CNBC's Fast Money Next Day

These factors all point to insider trading and a coordinated attack on Bitcoin. However, I still suspect this was more negligence than anything else. While individual employees and contractors at Coinbase likely engaged in insider trading (given it is very difficult to prove given the relative anonymity of cryptocurrencies), I doubt Coinbase as a whole engaged in this activity.

My reasoning is based on the same principles that Bitcoin's security is based on: Game theory. If you're one of the largest exchanges with a brand built on trustworthiness, would you really risk all of that for a short-term gain? Note that only 3k Bitcoin Cash changed hands on GDAX, which isn't the type of reward I'd look for if I was going to throw away a $1B+ business. While many more pumped on Bittrex (which would have led to handsome profits for any insider traders), it still isn't worth throwing away an entire business for such a gain.

Instead, I find it far more likely that some idiot(s) thought it'd increase Coinbase's brand reputation by surprising everyone with an earlier than expected release of support for Bitcoin Cash - Basically a nice little holiday gift. It then horribly backfired instantly and they immediately began damage control (which they are doing better than most companies given how awful this was).

I'm not saying it is 100% negligence; I wouldn't be surprised to learn of some insider trading. However, I think the bulk of this was pure stupidity. So my overall conclusion? I still trust them, just with less faith in their overall competency. I might move a larger amount of capital to Gemini despite their fees.

What are your thoughts?

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