In the wake of dramatic price swings that saw Bitcoin surge from $13,000 to over $19,000 and then crash within days, Coinbase issued a public plea to investors on December 9, 2017. The San Francisco-based cryptocurrency exchange, which now boasts over 13 million users, posted a blog titled “An important message from the Coinbase team,” acknowledging that the explosive growth of interest in digital currencies has created “extreme volatility and stress on our systems.”
Coinbase’s Open Letter: “Please Invest Responsibly”
The exchange’s blog began on a positive note, expressing excitement about the explosion of interest in digital currencies, but quickly pivoted to the challenges. “With success, however, comes the ability to manage success as it does create extreme volatility and stress on our systems,” the post read. It recalled the trading days of December 6-7, 2017, when Bitcoin set new all-time highs literally every few hours: $13,000, $14,000, $15,000, $16,000… until reports of a high above $19,000 were followed by a sharp retracement. During this period, Coinbase’s institutional platform GDAX went down, along with other exchanges like Kraken and even hardware wallet Trezor, while Bitpay also experienced hiccups.
To cope with the surge in demand, Coinbase revealed that it had increased the size of its support team by 640% and launched phone support. It also invested heavily in infrastructure, increasing the number of transactions processed during peak hours by over 40x. However, on December 7, Bitcoin jumped $3,000, causing the exchange’s services to fail — even login attempts were blocked. This was a repeat of the situation just a few weeks prior when Bitcoin hit $11,000. The problems frustrated customers and raised eyebrows on Wall Street, which was closely watching GDAX and other platforms ahead of the Sunday futures market debut.
CEO Warning: “Service May Become Degraded”
Coinbase CEO Brian Armstrong issued a stern warning in the blog: “There may be downtime which can impact your ability to trade… I wanted to remind customers that access to Coinbase services may become degraded or unavailable during times of significant volatility or volume. This could result in the inability to buy or sell for periods of time.” He advised users to read the User Agreement carefully. The exchange also reminded investors that digital currencies are volatile and prices can go up and down. “Due to the rapidly changing price of digital currencies, some customers may not have sell limits that are sufficient relative to the value of total digital currency they are storing,” the blog added. It ended with basic security precautions and a recommitment to improve.
Industry Expert: Futures Could Amplify Volatility
Not to be outdone, Bitmex CEO Arthur Hayes gave an interview to Alice Lloyd George regarding volatility and the upcoming introduction of futures. “Initially, because of the way these contracts are structured, they will actually increase the volatility of Bitcoin,” he said. Hayes detailed a scenario where futures, which typically stop trading over weekends, could be usurped by physical trading, creating potential price confusion. “People have been lulled into complacency with a market that keeps going up every day. They don’t understand that this is an extremely volatile asset. It’s not constrained by national borders,” he warned.
Coinbase’s plea comes at a critical moment as the cryptocurrency market matures and institutional products like Bitcoin futures prepare to launch. The exchange’s admission of technical limitations and its call for responsible investment highlights the growing pains of an industry that is struggling to handle mainstream adoption. For investors, the message is clear: high rewards come with equally high risks — both from market volatility and from the infrastructure that supports trading.