Coinbase Users Face $170 Million in Liquidations Amid Crypto Plunge
By John Nada·Feb 7, 2026·3 min read
Coinbase users face record losses as crypto-backed loans result in $170 million in liquidations amid a sharp decline in Bitcoin and Ethereum prices.
Thousands of Coinbase users are reeling as crypto-backed loans result in a staggering $170 million in liquidations, the highest amount in the product’s year-long history. According to Decrypt, the turmoil comes as Bitcoin and Ethereum experience significant declines, leaving many users vulnerable to losses through Coinbase’s lending platform. Over the past week, users have faced liquidations totaling $170 million worth of collateral via the Morpho platform, with nearly 2,000 users losing $90.7 million on a single day.
When Coinbase introduced Bitcoin-backed loans last year, it aimed to help users grow their wealth. The service later expanded to include Ethereum-backed loans, allowing customers to borrow up to $5 million. However, as Bitcoin and Ethereum fell by 17% and 26%, respectively, more loans reached liquidation thresholds, allowing third parties to repay them and seize collateral at a discount.
Many users found themselves in precarious positions, with around 3,300 sitting idle as their assets were liquidated. While these losses may seem minor in the context of the broader crypto market decline, they illustrate the risks associated with Coinbase's integration of decentralized finance (DeFi) into its offerings. Since launching, the lending product has generated $1.8 billion in loans.
Coinbase has assured users that they receive frequent notifications regarding their loans' risk levels, up to every 30 minutes. A spokesperson emphasized that these crypto-backed loans are typically quicker and cheaper than traditional loans, with built-in over-collateralization to mitigate risks. Yet, the exchange acknowledges that its users must fully understand these risks.
The company does not charge fees from liquidations but profits as a technology provider through performance fees earned by risk managers. Coinbase had previously offered centralized Bitcoin-backed loans but ceased issuing them in May 2023 amid increased regulatory scrutiny. The new product allows users to lend without disclosing personal information, a notable shift in the lending landscape.
In a previous statement, Max Branzburg, Coinbase’s head of consumer products, described the platform as empowering users to make significant financial decisions without selling their Bitcoin. However, the recent liquidations highlight the fragility of relying on crypto-backed loans in volatile market conditions.
The unfolding situation serves as a cautionary tale for crypto investors. As Coinbase aims to position itself as an 'everything exchange,' the risks associated with these new products must be clearly communicated to users. Understanding the potential for significant losses is crucial as the market continues to experience turbulence. This moment illustrates the delicate balance between innovation and risk in the ever-evolving crypto landscape.