Coinbase Set To Reclaim Junk Bonds Amidst Bitcoin’s Bullish Trend

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Coinbase Global Inc. has made headlines once again. This time, the world’s leading crypto exchange is making waves with its intention to buy back a portion of its junk bonds. The move comes as Bitcoin, the reigning monarch of cryptocurrencies, flirts with its highest valuation for 2023.

Understanding the Numbers

Bitcoin, with its heart-thumping volatility, recently touched a notable price of $31,386 in July, a commendable ascent from its previous year. At the close of trading on Monday, the crypto giant was valued at $29,204. Amid this optimistic backdrop, Coinbase is eyeing a redemption of its 3.625% notes due October 2031. Investors holding these bonds could find themselves pocketing between $615 and $645 for every $1,000 of the principal amount.

The bond market has responded favorably to this turn of events. The debt in focus has rallied to 62 cents on the dollar, showcasing a resilient recovery from its all-time low of 52 cents back in November.

Why Are Companies Buying Back Debt?

It’s not just Coinbase in the buyback arena. Rising interest rates are nudging corporate entities to repurchase debt, especially since refinancing is becoming an increasingly costly affair. Recent moves by Warner Bros Discovery Inc. and Verizon Communications Inc. underscore the growing trend. The former plans to reclaim bonds worth $2.7 billion maturing between December 2023 and June 2024. Meanwhile, Verizon is gearing up for a staggering $1.5 billion bond buyback, stretching the maturity dates between 2024 and 2036.

The Bigger Picture: Speculation & The Role of SEC

The market is rife with speculation on the real motives behind the SEC’s critical stance towards crypto giants like Binance and Coinbase. Some argue that the heart of the matter may revolve around liquidity. With the U.S. government rolling out an impressive $170 billion in bond offerings this week and more in the pipeline, questions arise. Is the liquidity crunch pushing the government’s hand to get these exchanges to invest in junk bonds?