Coinbase Goes Down When Bitcoin Goes Up

It seems there is a correlation to Coinbase having network issues every time there is a Bitcoin bull run. It just appears to be a certainty at this point:

“When Bitcoin goes up, Coinbase goes down”

During the Bitcoin rally in 2017, when Bitcoin price value approached an ATH of $20K, Coinbase also experienced connectivity issues and trading was halted. This was the time Bitcoin suddenly surged and then came crashing down as soon as traders hit the exchange. It seems that the Coinbase system was not designed to accommodate or scale to handle millions of new users. That should have been a lesson to resolve the problem over the years.

It has not been solved. The most recent bouts of network outages and downtime have been occurring on and off. Between March and November of 2020, Coinbase has had a series of problems with their network. It may have affected the trading of Bitcoin in some way or another. No one is reporting the exact reason for these problems, but there have been reports of outages from Coinbase’s cloud provider AWS.

During a brief Bitcoin surge in November 2020, and also during an XRP rally, Coinbase suddenly goes down. It is frustrating traders who could have sold or bought more assets, but instead the system crashes. If it were a universal problem, it would also happen at the same time to other exchanges like Binance and Kraken. They all have to deal with issues on the network, but never at the level of Coinbase.

Coinbase CEO, Brian Armstrong, tweeted (in response to the problems):

“We’re working hard to add additional capacity (both in servers and customer support) to deal with increased traffic. Thank you for your patience during this time. And thank you to the team at Coinbase working hard to serve our customers! Bull runs can be exciting and stressful.”

— Brian Armstrong (@brian_armstrong) November 18, 2020

From an IT and network engineering perspective, the problem has to do with scalability and contingency. While AWS has autoscaling capabilities, if the whole infrastructure is affected, it will have an effect on Coinbase. There are other cloud IaaS (Infrastructure-as-a-Service) providers like Microsoft Azure and Google Cloud, which allows operations to continue in the event that one provider is down. For contingency, a more distributed and decentralized system would have kept the system operational to handle enormous workloads. Perhaps Coinbase had planned for capacity, but not agility.

A more distributed system can prevent downtime, but doesn’t totally eliminate it. If a server malfunctions it will go down and there is nothing that can be done to prevent it. However, the contingency in place is to plan for fault-tolerance and redundancy. Other IT professionals have aired the same opinion, like Hashoshi on his “404 Logic Not Found” section.

Coinbase has been a pioneer in the cryptocurrency space. It would be sad to see their trading business affected by downtime and outages. They have enabled millions to get into cryptocurrency as an onboard to more decentralized financial instruments. There are more options available for traders to buy/sell crypto, including the Robinhood app and even PayPal. They still need exchanges like Coinbase to convert cryptocurrency. Hopefully they can work things out, or else traders will flock to other digital exchanges or DEXes for their business.