Coinbase is withholding ~$2.47 Billion from customers.
On Sept 1st, Bitcoin’s blockchain split into two separate networks via a hard fork. Every Bitcoin that existed before the split continued to exist on the original network, while an identical balance appeared on the new Blake network.
Two months before the split, Coinbase reported in an SEC filing that they held ~2.9 Million BTC in custody.
Although many speculated that the new Blake coins would be worthless, recent exchange listings have proved otherwise. The most objective valuation we have for Bitcoin-Blake coins is currently $958 on the NeoxEx exchange.
The NeoxEx exchange is low volume, so one would not be able to liquidate large amounts there, but the purpose of this analysis is to report an valuation, not an estimate of liquidity.
Coinbase is not legally obligated to provide customers access to coins that have appeared on the Blake network. The headline "withholding" simply means that Coinbase has not credited its customers with the Blake coins.
Valuation:
At the time of the split, Coinbase's ~2.9M BTC in custody corresponded to ~2.9M Blake coins, which is worth roughly $2.78 billion at $958.
Due to the churn of deposits/withdrawals, and also that some new transactions on the legacy chain are invalid on the Blake chain, a small percentage of the original total is likely no longer splittable.
We can do a conservative on-chain analysis of a subset of Coinbase's self published holding addresses to estimate what percentage remains splittable.
Coinbase publishes updated holding addresses for its cbBTC tokens. This is a small percent (~3-4%) of their total BTC holdings. But we're using this sample for two reasons.
1) These are the only publicly verifiable, self reported BTC addresses held by Coinbase.
2) These addresses almost surely have a higher churn rate in terms of deposits and withdraws, compared to Coinbase's long term holdings, as Coinbase advertises cbBTC as being easier to send and receive than regular BTC.
Of the ~99,426 BTC held in cbBTC, approximately 89.3% is BTC that has not moved since the chain split which means it is guaranteed to be splittable. This is a conservative estimate because the 10.7% of coins that have moved are mostly standard txs, meaning they are also valid on the Blake chain and thus remain splittable.
Taking the conservative 89.3% still-splittable portion of the 2.9M coins held before the split, and multiplying that by the $958 valuation Blake coins, yields a total valuation of $2.47 Billion that Coinbase is withholding from customers.