Cryptocurrency exchanges were unable to adequately serve investors panicking over steep price declines
Just as Bitcoin seemed like the hottest investment ever, it started to melt down. And along with the decline came a rise in complaints from thousands who felt duped.
According to an analysis by personal finance site ValuePenguin, thousands of cryptocurrency holders in the US have filed complaints to the country’s Consumer Financial Protection Bureau (CFPB) in the last nine months, reported MarketWatch. The number of complaints skyrocketed just as Bitcoin’s price fell.
David Ascienzo, data scientist at ValuePenguin and author of the report, said the top cause for complaints was being unable to withdraw money from exchanges. The number of complaints rose 669% between June 2017 and March 2018 as new cryptocurrency investors with little risk tolerance rushed for the exits during dips.
“Bitcoin’s prices have been volatile since it appeared in the late 2000s, hitting a maximum of $20,000 in mid-December 2017 and then falling swiftly to $14,000 by Christmas,” MarketWatch said. On Wednesday, the cryptocurrency fell to around US$8,500 on news of Japan’s Financial Services Agency planning to tell Binance to stop operations in the country without a license.
During the week of Bitcoin’s steepest decline, the number of complaints about exchanges, particularly at major exchange Coinbase, reached a climax.
“I don’t think the price going as high as it did was expected,” Ascienzo told MarketWatch. “As it started to fall a lot of people wanted to cash out and cut their losses but this large increase of people trying to trade out at the same time caused a large transaction volume Coinbase wasn’t prepared for.”
Coinbase has faced criticism for other shortfalls. Aside from insufficient customer service representatives, Coinbase users have complained of unexpected bank charges and overdraft fees, which in some cases totally depleted people’s bank accounts. The platform charges its users 4% for credit-card deposits to fund their cryptocurrency trading accounts; similar fees apply for bank transfers.
“On March 1, Coinbase announced an ‘overhaul,’ including hiring more customer support employees and increasing the infrastructure for transactions and paying taxes,” MarketWatch said.