Coinbase Flags Forced Liquidation Threats Amid Debt Pressures
Coinbase Warns: Rising Debt Could Trigger Crypto Sell-Offs by Public Funds
Coinbase has issued a cautionary report warning that some publicly traded crypto vehicles (PTCVs) may soon be forced to sell off digital assets as debt pressures mount—posing a hidden risk to the broader crypto market.
The core concern lies in convertible bonds issued by many of these firms, which were originally used to cheaply raise capital to buy cryptocurrencies. However, with the market facing price volatility and interest rates remaining high, refinancing these debts is becoming more difficult, Coinbase explained.
If crypto prices fall and refinancing dries up, the pressure to liquidate crypto holdings to meet obligations could trigger cascading market sell-offs,” the report noted.
While loan-to-value ratios remain largely manageable for now, Coinbase emphasized that the ability to refinance is a critical risk factor. Many of these vehicles have opaque and inconsistent capital structures, making it harder for analysts and regulators to assess stability.
Cautious Optimism: Institutional Growth Could Offset Liquidation Risk
Despite the warnings, Coinbase maintains a measured optimism heading into the second half of 2025. The firm pointed to growing corporate accumulation of crypto assets and a likely resurgence of traditional finance participation in the digital asset sector.
“Many large firms still have strategic levers they can pull to avoid forced sales,” Coinbase added, citing cash reserves, credit lines, and treasury restructuring options.
