Last December the value of Bitcoin (BTC) climbed to around $19,500, shattering record highs. The unexpected increase sparked a digital gold rush, generating media coverage and broader public interest in the world of cryptocurrencies. Unfortunately for eager investors and traders, the three-month-long trend eventually came to an end, and the value of BTC began to fall.
The price fall ushered in a surge of consumer complaints received by the Consumer Financial Protection Bureau (CFPB) over financial issues with Coinbase, a large cryptocurrency exchange headquartered in San Francisco. We took a look at complaints received between June 1, 2017, and March 1, 2018, and were able to make some interesting observations.
- Consumer complaints surged as Bitcoin prices crashed. Complaints submitted to the CFPB boil down to technical issues with the exchange platform Coinbase and accusations of fraud.
- Money being unavailable was the No. 1 complaint. Consumers struggled to transfer and trade their cryptocurrencies at a critical time. Complaints spiked to a climax during the week when the price decline was steepest.
- High transaction volumes led to wire transfer and transaction delays. Customer support was difficult to reach for consumers.
Weekly Coinbase complaints vs. Bitcoin pricing
Higher numbers of complaints rolled in just as prices started crashing, reaching a climax during the week of sharpest descent. Even then, BTC prices didn’t fall anywhere near where they were in the earlier half of 2017, but the data shows an array of negative experiences for consumers struggling to manage their coins when it mattered the most.
These complaints bring to light the technical issues, nuances and risks involved in the volatile world of cryptocurrency trading. As many consumers learned during the crash, technical setbacks can end up costing you precious time, money and peace of mind, and whether or not you’re a careful trader may not matter in the face of mishaps that are out of your control.
Consumer complaint narratives
Reading through some narratives painted a woeful image of consumers struggling to transfer funds from their digital wallets and, in some cases, having their accounts frozen or locked up during the panicked period of declining prices. Out of the 2,271 consumer complaints we looked at, most were concerned with their money not being available at an expected time. The other two leading categories were related to transaction problems and fraud or scam complaints.
Top 5 Coinbase complaints
On Dec. 18, 2017, one consumer wrote, "Coinbase is a fraud. They state on their website withdrawal timeline for wires as 1 business day. Upon making the withdrawal, I have received the email stating that the wire might be delayed three business days." Coincidentally, Coinbase posted a notice three days earlier stating that long delays could be expected due to high transaction volumes.
Others were a little more explicit in their blame, with one consumer outright accusing Coinbase of theft, writing, "It has been eight days since my $1,000 deposit has been withdrawn from my checking account, but it [was] never confirmed by Coinbase. Coinbase simply stole $1,000 from me."
Weekly Coinbase complaints by top issues
Wire transfer delays continued from Dec. 15, 2017, until Jan. 13, 2018, but were also accompanied by transaction delays between Jan. 4 and Jan. 9, during the period of steepest descent in BTC prices. It was during this time period when the CFPB received a whopping 358 complaints about Coinbase in a single week.
One particular consumer’s narrative reads, "[…] my sell order rejected because they shut down the exchange due to a computer glitch on their behalf. I lost out on a sale of about $100,000. I came back the next day to find the price crashed […]." Falling prices were accompanied by increased trading frequencies as users scrambled to cash out and cut their losses, which couldn’t have helped in shortening Coinbase’s backlog during the ordeal.
Complaints submitted to the CFPB have two main ways of closing: either with some form of relief provided by the company in question or with an explanation for the issue. All closed complaints that we looked at were closed with an explanation from the company. However, many consumers emphasized their difficulties in getting in touch with Coinbase’s customer support team, with one account noting "[...] their customer service is illusory at best." The CFPB was able to at least help consumers receive timely explanations for their individual issues.
Complaints were retrieved from the CFPB’s consumer complaint database and Bitcoin historical prices were retrieved from coinmarketcap.com. The CFPB’s database is updated frequently, and all information used in this study is based on data that was retrieved on March 12, 2018, at 9:40 a.m. Of the 2,271 complaints we looked at between June 1, 2017, and March 1, 2018, only 42.9% of them had provided consumer complaint narratives at the time of acquisition.