Coinbase's Crypto-Backed Loans Notch Record Liquidations Amid Bitcoin, Ethereum Plunge
Coinbase customers have suffered $170 million in collateral losses through liquidations on the Morpho DeFi platform amid sharp declines in Bitcoin and Ethereum prices. About 2,000 users lost $90.7 million in a single day as crypto values dropped 17% and 26% over the past week. Coinbase’s crypto-backed loans, introduced last year and now supporting both Bitcoin and Ethereum, allow borrowing up to $5 million. As asset prices fell, many loans became under-collateralized, triggering liquidations in which collateral is sold off to repay debt, often at a loss to users. Some users added collateral or paid down debt, but around 3,300 did not, resulting in permanent loss of their crypto assets. Since launch, the product has originated $1.8 billion in loans. Coinbase asserts that its loans are over-collateralized and users receive frequent risk alerts, but acknowledges the risks involved. The company profits as a technology provider, not from liquidations, and is exploring further risk protection tools. The product’s decentralized design allows users to borrow without providing personal information.
