Coinbase is one of the best known cryptocurrency exchanges. The company’s benefitting from the Bitcoin boom period of the past few months by charging transaction fees as customers invest. The attention Bitcoin is attracting is leading new investors to start purchasing cryptocurrencies. Armstrong cautioned Coinbase users to remain mindful of the risks.
Despite its high price, Bitcoin remains a less secure investment than traditional alternatives.
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Cryptocurrencies are volatile and violent price swings can occur within hours of each other. The upwards trend isn’t deterring new investors though, with demand for Coinbase’s services growing as more people start to buy. The company’s app hit the top of the App Store charts this week.
Coinbase said it has made considerable investments in its platform to increase its capacity. The number of transactions it’s processing at peak times is up to 40 percent higher than last year. The company warned that despite its upgrades, its service could still become “degraded” when trading volume is high. Users may find themselves unable to trade when they place a buy or sell order.
“The last few weeks has seen an unprecedented increase in the price of digital currencies,” said Armstrong. “More people are engaging with our platform than ever and that bodes well for the future of the digital currency. At the same time, it does create extreme volatility and stress on our systems.”
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The warning from one of the largest cryptocurrency trading platforms is another sign that the Bitcoin rally may not last much longer. In under a year, the digital coin has soared from less than $1,000 to record highs of over $17,000 this month. The increases have been driven by new attention from mainstream investors looking for an alternative to traditional assets.
The comments from Coinbase indicate the bubble is making even cryptocurrency exchanges uncomfortable. The market could crash at any moment. Inexperienced investors might end up in severe financial difficulties if they’ve invested more than they can afford to lose.
Coinbase said it wants to ensure investors are “educated” and aware of the situation that faces crypto marketplaces. The company also addressed the issue of security, reminding users to enable two-factor authentication and complete any pending identity verifications on their account. Investors should take basic steps to protect their Coinbase wallets, making it less likely they’ll be impacted if the service is hacked.
