Coinbase Sells $25M in ETH, Denies Profit Maximization

Coinbase, a prominent cryptocurrency exchange, sold 12,652 Ethereum (ETH) in the fourth quarter of 2024, according to an analysis by Geoffrey Kendrick. This sale, valued at approximately $25 million based on current prices, has ignited discussions about whether Coinbase is strategically selling ETH to maximize profits rather than holding it for the long term.

Kendrick, who leads digital assets research, examined Coinbase’s quarterly reports and found that the exchange categorizes its ETH holdings into different funds, including investment and operational categories. He observed that Coinbase tends to buy ETH when prices are low and sell when prices rise. In the third quarter, when ETH was around $2,500, the company was a net buyer. However, in the fourth quarter, as ETH climbed to $4,000, Coinbase sold more ETH than it bought. This pattern suggests that Coinbase is acting as a "risk-adjusting profit maximizer," leveraging price fluctuations to manage its financial strategy effectively.

In response to these claims, Coinbase acknowledged selling some ETH but clarified that the proceeds were used to fund operational needs. A company spokesperson explained that Base, Coinbase’s Ethereum layer-2 blockchain, generates ETH through sequencer fees. While most of this ETH is held for long-term investment, some is allocated for salaries, acquisitions, taxes, and grants. Coinbase also denied being a trading-focused entity, highlighting that its ETH holdings for investment grew by 20% in 2024. The exchange emphasized that it does not actively trade crypto assets but may lend or stake them when necessary.

This is not the first time Coinbase has faced scrutiny over its ETH holdings. Earlier, a Base representative dismissed rumors about ETH sales, stating that Coinbase had accumulated over $300 million in ETH—more than double its earnings from Base.

Despite Ethereum’s 7% price surge and reclaiming the crucial $2,000 level, the U.S. Ethereum spot ETF market continues to experience outflows. ETFs saw a significant outflow of $11.7 million, extending the trend of investors pulling out. BlackRock’s ETHA led the losses, recording a net outflow of $12.9 million. Fidelity’s FETH also saw a loss of $2 million, while Grayscale Mini ETH experienced another $7.7 million outflow.