Coinbase Is Set To Increase Corporate Bonds Amid Rising Demand
17 September 2021 - 7:00AM
NEWSBTC
In a recent development, Coinbase issued a junk bond, and the
market seemed to be hungry for the instrument. Currently, the US
crypto exchange is recording more demands for these bonds every
day. With these demands, the crypto exchange’s sales have grown
from $1.5B to $2B. Bonds are fixed investments that yield interest
monthly. But when we talk of junk bonds, investors make higher
returns but face higher risks as well. Companies usually issue junk
bonds to raise capital very fast for a major project. Corporate
Bond Orders Keep Rising The orders have continued to troop in for
the Coinbase junk bond. One of our sources reveals that the orders
amounting to $7 billion are competing for 7 and ten-year bonds,
with interests of 3.375% & 3.625% each. From our sources, we
also learned that some claims have risen that the interest rates
were lower than what Coinbase offered in the first quotes. Related
Reading | New To Bitcoin? Learn To Trade Crypto With The NewsBTC
Trading Course This increasing demand proves that the exchange
didn’t know the extent to which the public regarded its
creditworthiness. If they offered higher rates in the quotes, it
meant that Coinbase was unsure that many people would invest in the
bonds. So, the high demand showed them their worth, and the
company reduced the rates. Moreover, an analyst with Bloomberg
stated that this high demand shows that debt investors have
endorsed the exchange positively. But these bonds rank a bit lower
than investment-grade bonds, according to Bloomberg bond indexes
showing that debts offerings like what Coinbase issued get an
average of 2.86% yield. Coinbase And The Junk Bond Journey The
US-based crypto exchange announced this junk-bond issue on
September 13. According to that announcement, the company aims to
use the capital for its products developments. Also, they aim to
acquire other technologies, companies, and products that they might
find in the time to come. Coinbase is the second crypto company to
offer this debt instrument. Before now, MicroStrategy issued Notes
worth $500M to invest in Bitcoin following the June market crash.
So, the crypto community has seen the likes of junk-bond offerings
before now. This might be the reason for the surging demand plus
the popularity of Coinbase in the industry. On its opening day, the
bond traded at $342 while the company’s COIN Stock sold for $243.
But the COIN has managed to gain 20% since the end of June. What
surprised the community more is that the exchange is facing a lot
of threats from the SEC, yet the investors pushed money into the
bond. Related Reading | Since China’s Mining Ban, Bitcoin Hashrate
Has Recovered by 68% And Counting The Securities and Exchange
Commission threatens the crypto exchange with possible legal action
if it launches a USDC lending product. Before this threat, Coinbase
planned to launch the USD Coin. But it seems that the company is
keeping the plans at bay for the time being. Currently the USD Coin
is trading sideways | Source: USDCUSDT on TradingView.com Featured
image from Business Insider, chart from TradingView.com
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