Brian’s Big Bags: The Risks of Coinbase’s Role in Bitcoin Spot ETFs

The Significance of Coinbase as Bitcoin Spot ETF Custodian

As the approval of the ETF draws near, questions arise about the responsibility of the custodian and the security of our coins. While Twitter is abuzz with self-proclaimed ETF experts and news about punctuation changes in applications, Coinbase has quietly positioned itself as a key player in the future of paper Bitcoin. In fact, Coinbase is now listed as the custodian on 9 out of the 12 Bitcoin Spot ETF applications. This development raises eyebrows and demands a closer look.

With Coinbase's involvement in these ETFs becoming increasingly certain, one cannot help but wonder what is happening behind the scenes. Just 10 days ago, Coinbase made a significant change in leadership by replacing their custody CEO, Aaron Schnarch, with Rick Schonberg, a 30-year Wall Street veteran. This move is quite intriguing, especially considering the timing, as it occurred just weeks before the ETF approval. It begs the question: is Coinbase playing a vital role in the NY Banking Cartel's plans?

The Role of Coinbase and the NY Banking Cartel

While conspiracy theories about the NY Banking Cartel may seem far-fetched, the concentration of custodial roles in Coinbase's hands raises concerns. Are outsiders truly welcome in this scenario? Will the NY Banking Cartel yield to the influence of Bay Area grays?

The Importance of Custodial Risk

Putting aside the speculation surrounding the NY Banking Cartel, it is crucial to examine Coinbase's position and the associated custodial risks. Custodial risk refers to the potential dangers of entrusting a third party, known as a custodian, with the management and safekeeping of financial assets. These risks can manifest in various forms:

Operational Risk

This risk arises from the custodian's operational failures, such as administrative errors, technology glitches, process breakdowns, or even the loss of encryption keys.

Fraud Risk

This risk entails the possibility of the custodian engaging in fraudulent activities, such as misappropriation of assets or manipulation of records.

Credit Risk

Credit risk refers to the potential insolvency of the custodian, which could result in the loss of assets or the custodian's inability to fulfill its obligations.

Legal and Regulatory Risk

This risk stems from non-compliance with laws and regulations, which may lead to fines, penalties, or legal actions.

Counterparty Risk

In situations where the custodian conducts transactions on behalf of the client, there is a risk that the counterparty may default or fail to honor its obligations.

Security Risk

This risk involves the theft or loss of assets due to inadequate physical or digital security measures.

Considering that Coinbase now handles 75% of the Bitcoin ETFs as a custodian, each of these risks becomes a legitimate concern. While it is not my intention to spread fear, the recent change in leadership and the concentration of funds in a single custodian are significant red flags. This situation increases the likelihood of a scenario where the government seizes Bitcoin, a regulatory crackdown occurs, or cyber attacks compromise the security of these funds. Investors must take these risks into account before relying on a single entity like Coinbase for the storage and management of their paper bitcoin reserves.

Conclusion

The emergence of Coinbase as the custodian for the majority of Bitcoin Spot ETF applications raises valid concerns about custodial risk. While centralized custody services may offer convenience, it is essential for individuals to conduct thorough research and understand the implications of entrusting their assets to a single entity. By doing so, they can make informed decisions and mitigate exposure to potential threats posed by regulatory seizures, cyber attacks, or unforeseen events. As the ETF approval looms closer, the role of the NY Banking Cartel in Bitcoin becomes more pronounced, leaving many to wonder about Brian's Big Bags.

Footnotes

[1] Rick Schonberg, a 30-year Wall Street veteran, is an ideal fit for the role of Coinbase's new custody CEO, considering his impressive resume.

[2] The term "grays" was coined by Balaji last year, referring to a third political tribe that has no allegiance to either the Blue or Red party. Grays are capitalist builders who prioritize creation over political affiliation.

[3] While I am not personally invested in this product and not a customer of Coinbase, it is hard to ignore the potential risks and implications of the concentration of custodial roles in one entity. The saying "not your keys, not your coins" resonates in this scenario.

Frequently Asked Questions

Is it a good idea to open a Precious Metal IRA

It is essential to be aware of the fact that precious metals do not have insurance coverage before opening an IRA. You cannot recover any money you have invested. This includes any loss of investments from theft, fire, flood or other circumstances.

It is best to invest in physical gold coins and silver coins to avoid this type loss. These items have been around thousands of years and are irreplaceable. You would probably get more if you sold them today than you paid when they were first created.

When opening an IRA account, make sure you choose a reputable company offering competitive rates and high-quality products. A third-party custodian is a good option. They will protect your assets while giving you easy access whenever you need them.

If you decide to open an account, remember that you won't see any returns until after you retire. Don't forget the future!

Should You Buy Gold?

Gold was once considered an investment safe haven during times of economic crisis. However, today many people are turning away from traditional investments such as stocks and bonds and instead looking toward precious metals such as gold.

The trend for gold prices has been upward in recent years but they still remain low relative to other commodities like silver and oil.

Some experts believe that this could change very soon. Experts predict that gold prices will rise sharply in the wake of another global financial collapse.

They also point out that gold is becoming popular because of its perceived value and potential return.

Consider these things if you are thinking of investing in gold.

The first thing to do is assess whether you actually need the money you're putting aside for retirement. It's possible to save for retirement without putting your savings into gold. The added protection that gold provides when you retire is a good option.
Second, make sure you understand what you're getting yourself into before you start buying gold.There are several different types of gold IRA accounts available. Each account offers different levels of security and flexibility.
Finally, remember that gold doesn't offer the same level of safety as a bank account. If you lose your gold coins, you may never recover them.

Don't buy gold unless you have done your research. You should also ensure that you do everything you can to protect your gold.

How is gold taxed in an IRA?

The fair market value of gold sold is the basis for tax. Gold is not subject to tax when it's purchased. It is not income. If you decide to sell it later, there will be a taxable gain if its price rises.

As collateral for loans, gold is possible. When you borrow against your assets, lenders try to find the highest return possible. Selling gold is usually the best option. However, there is no guarantee that the lender would do this. They might just hold onto it. They may decide to resell it. The bottom line is that you could lose potential profit in any case.

In order to avoid losing your money, only lend against your precious metal if you plan to use it to secure other collateral. You should leave it alone if you don't intend to lend against it.

How much money should I put into my Roth IRA?

Roth IRAs can be used to save taxes on your retirement funds. The account cannot be withdrawn from until you are 59 1/2. There are some rules that you need to keep in mind if you want to withdraw funds from these accounts before you reach 59 1/2. First, you cannot touch your principal (the original amount deposited). You cannot withdraw more than the original amount you contributed. If you are able to take out more that what you have initially contributed, you must pay taxes.

The second rule is that you cannot withdraw your earnings without paying income taxes. So, when you withdraw, you'll pay taxes on those earnings. For example, let's say that you contribute $5,000 to your Roth IRA every year. Let's also say that you earn $10,000 per annum after contributing. You would owe $3,500 in federal income taxes on the earnings. The remaining $6,500 is yours. The amount you can withdraw is limited to the original contribution.

The $4,000 you take out of your earnings would be subject to taxes. You'd still owe $1,500 in taxes. On top of that, you'd lose half of the earnings you had taken out because they would be taxed again at 50% (half of 40%). You only got back $4,000. Even though you were able to withdraw $7,000 from your Roth IRA,

There are two types if Roth IRAs, Roth and Traditional. Traditional IRAs allow for pre-tax deductions from your taxable earnings. Your traditional IRA allows you to withdraw your entire contribution plus any interest. A traditional IRA can be withdrawn up to the maximum amount allowed.

A Roth IRA doesn't allow you to deduct your contributions. After you have retired, the full amount of your contributions and accrued interest can be withdrawn. Unlike a traditional IRA, there is no minimum withdrawal requirement. You don't have to wait until you turn 70 1/2 years old before withdrawing your contribution.

Can I purchase gold with my self directed IRA?

You can purchase gold with your self-directed IRA, but you must first open an account at a brokerage firm like TD Ameritrade. If you already have a retirement account, funds can be transferred to it.

Individuals can contribute as much as $5,500 per year ($6,500 if married filing jointly) to a traditional IRA. Individuals are allowed to contribute $1,000 each ($2,000 if married or filing jointly) to a Roth IRA.

You should consider buying physical gold bullion if you decide to invest in it. Futures contracts are financial instruments based on the price of gold. You can speculate on future prices, but not own the metal. However, physical bullion is real gold or silver bars you can hold in your hands.

Statistics

Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
You can only purchase gold bars at least 99.5% purity. (forbes.com)
Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
(Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)

External Links

How To

Three ways to invest in gold for retirement

It's essential to understand how gold fits into your retirement plan. There are many ways to invest in gold if you have a 401k account at work. You might also consider investing in gold outside your workplace. If you have an IRA (Individual Retirement Account), a custodial account could be opened at Fidelity Investments. Or, if you don't already own any precious metals, you may want to consider buying them directly from a reputable dealer.

These are three simple rules to help you make an investment in gold.

Buy Gold with Your Cash – Don't use credit cards or borrow money to fund your investments. Instead, instead, transfer cash to your accounts. This will help you to protect yourself against inflation while also preserving your purchasing power.
Physical Gold Coins: You should own physical gold coins, not just a certificate. Physical gold coins can be sold much faster than paper certificates. Physical gold coins are also free from storage fees.
Diversify Your Portfolio – Never put all of your eggs in one basket. By investing in multiple assets, you can spread your wealth. This helps to reduce risk and provides more flexibility when markets are volatile.

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By: Joe Rodgers
Title: Brian's Big Bags: The Risks of Coinbase's Role in Bitcoin Spot ETFs
Sourced From: bitcoinmagazine.com/markets/brians-big-bags-etf
Published Date: Tue, 09 Jan 2024 14:40:06 GMT