Weaponizing the Bear Market: How Coinbase Played Both Sides and Won
With the crypto bear market firmly in the rearview mirror, now is the perfect time to analyze what happened, interpret the fallout, and prepare for the next one. While many exchanges were operating with survival in mind, cutting staff, shutting down side projects, and praying their cash flows would carry them through the winter, Coinbase opted to play a different game: They weaponized the winter. Their strategy was different; they continued to embrace the chaos of the crypto casinos while cozying up to the suits in Washington. It let them signal legitimacy while keeping retail engaged. In doing so they ensured their own survival, and the opportunity to thrive in the ensuing bull market.
The Winter of 22-23
The bear market is full of stories of failures. Terra was the first to go in May 2022, and that set off a chain reaction. Celsius, Voyager, BlockFi, Three Arrows, and FTX all followed in their wake. Furthermore, many other companies significantly scaled back operations, Binance retreated, Kraken froze, Gemini cut. The big boys weathered the storm, but they didn’t emerge unscathed.
Crypto users are familiar with most of these stories, but what’s less-often discussed is why some companies flipped the script and powered through the bear market.
Coinbase was in a bad place. The hangover from the 2021 IPO was bleeding them dry, their stock price cratered, and their “crypto app store” idea completely flopped. If they continued playing by the old script they’d have starved through the bear market too. Instead, they changed the narrative.
First Move: Cut Deep, Then Amplify
At first look, Coinbase did scale back. Internally brutal, they cut their workforce by 20% and ended expensive experiments. The “Silicon Valley startup” narrative was gone, And unlike other aforementioned exchanges, they didn’t try to hide this pain. It was publicly-staged, almost a theatrical climbdown. Employees shared memos from CEO Brian Armstrong, seemingly written for journalists to quote farm: “We grew too fast. We need discipline. We need to survive.”
But there were two sides to this strategy. This wasn’t just about public perception, it was also about credibility in Washington. Coinbase was clearly demonstrating that they were the adult in the room. In a space known for the zany and outlandish, they sought to present as calm and collected. This is exactly what the institutions needed to see, and the payoff was resounding for them.
Next Up: The Washington Game
Coinbase laid the groundwork for institutional approval, next was the time to play their hand. They leaned into politics harder than ever: Testifying before congress, lobbying quietly in the SEC’s sphere of influence, and rebranding as the regulated alternative to the crypto Wild West. This was no longer about mere survival; they intended to come out of this bear market as the winners.
The FTX implosion was pivotal. While the public saw FTX as everything wrong with crypto, it enabled Coinbase to position itself as the anti-FTX. Coinbase was transparent, compliant, and audited. Every headline about Sam Bankman-Fried’s many crimes served as an ad for Coinbase. Washington was keen on this messaging. Despite the bear market, the industry was too big to be allowed to wither and die. And the smarter people in the room knew that the industry would rebound. Washington needed industry heads who were reliable and trustworthy to spearhead the next revival. Senators quoted Armstrong in hearings and lobbying hit all-time highs. Coinbase had played their hand perfectly, and Washington was ready and willing to play it with them.
The Retail Play: The Casino Is Always Open
While Coinbase’s strategy developed, and they gained the favor of Washington, the exchange remained open and continued to function much as it had before. Risky tokens were still listed on a regular basis and they built upon staking. They even offered products that the SEC later tried to kill. While Armstrong played statesman in D.C., the crypto dopamine loop remained their core business model: generate hype, generate trading fees, and monetize volatility.
Coinbase had successfully convinced regulators that they were the safe option without fundamentally changing anything about their business model. Their risk exposure stayed where it counted, with retail, while the state saw that they were different from the degenerates that ran FTX.
The Final Puzzle Piece: How Coinbase Became Wall Street’s Gatekeeper
This was perhaps the most impressive stage of the masterplan. While all of the prior steps seem obvious in hindsight, how would Coinbase convince Wall Street that they needed them? Coinbase knew that the institutions still wanted to be in crypto, they just needed a grown-up to work with. The likes of BlackRock and Ark weren’t too keen on Binance, they needed a U.S.-regulated partner.
Up stepped Coinbase. They positioned themselves as the surveillance partner for ETF issuers and partnered with BlackRock for custody. Retail volumes collapsed, but institutional money made up the shortfall and then some. Coinbase was now the institutionally-approved, trusted insider.
So Coinbase was now the on-ramp for retail and institutions alike. This was a textbook example of how to play both sides and come out on top. Everyone got what they wanted, and Coinbase was now ready to dominate.
The Story in Numbers
It’s worth taking a moment to breakdown some of the numbers.
· In Q2 2022, Coinbase lost over $1bn in a single quarter.
· By Q4 2023, Coinbase was once again a profitable enterprise.
· In July 2025, Coinbase stock was up 1000% from its 2023 lows.
Coinbase didn’t meaningfully change anything about their offering. They pulled off this drastic turnaround by weaponizing the bear. They looked at the environment they found themselves in, and instead of succumbing to the pressures like many of their rivals did, they turned it into an opportunity.
Managing the Tension
This isn’t a ‘happily ever after’ fairytale. Coinbase has to keep all parties onside. Retail still wants the shiny new plaything, Washington still demands a regulatorily-compliant environment, and Wall Street still wants safe investments. The beauty of Coinbase’s model lies entirely within these contractions, which is why their true moat is theater. They perform different roles depending on who their audience is and what the market demands at a given moment in time. They won the crypto bear market, but whether their success persists remains to be seen.
Lessons for Builders
The crux of this story is what can be learned from it. Here are some of the useful takeaways:
Communicate Honestly, Frame Positively: The truth will always out, so it’s better to be honest today and deal with the pain now. However, as bad as things may seem, a positive outlook is crucial to keep moving forwards.
Choose Your Partners Carefully: The crypto Wild West is still very much a real thing. Selecting who you work with is as important as the work you do.
Cut Fast, Move Faster: When the writing is on the wall, acting with haste is a survivalistic imperative. Analyze the playing field, get a plan, then take action.
Optics Over Functionality: Your product needs to work on some level, but how people perceive you is the most important marker of success.
Horses for Courses: Identify your problems and then who you need to fix those problems.
Play to Your Audience: You have different people to appeal to depending on the context. Figure out who they are, what they want, and how to ingratiate yourself with them when appropriate.
Keep Your Customers Happy: User retention while everything is falling down around you is critical. Don’t lose them entirely.
We don’t know what the nature of the next bear market will be, but these timeless lessons served Coinbase well, and will likely come up trumps again in the next bear market.
The Takeaway
While most crypto companies tried to hide from the bear market, Coinbase leaned into it harder than ever before. In a space where we’ve become accustomed to these dramatic boom and bust cycles, it seems pertinent to prepare for the next bear market. So Coinbase not only dampened the blows for themselves, they leveraged their competitors’ failures to their advantage.
The key takeaway is clear: operate with ruthlessness, command the narrative, and play the political game. If you can effectively combine these three arms of your business, you will dominate in a period when everyone else is struggling to come to terms with the downturn. Coinbase’s playbook in the bear market is a masterclass in how to juggle several balls at once and win the day, all while changing nothing about the fundamentals of the business model.
Value in crypto isn’t explaining tokenomics for the millionth time, nor is it rehashing protocols over and over again. Real value is in connecting dots across a wide array of domains. From strategy, to finance, to culture, and politics; Coinbase executed it to perfection. As the bull market continues, Coinbase thrives like everybody else. But if and when the next bear market comes, they have already demonstrated that they know how to ride the waves, and you can be confident that they’ll deal with whatever hardships come their way.