Coinbase cryptocurrency exchange has increased the size of its junk bond offering from $1.5 billion to $2 billion, due to overwhelming demand.
According to the Economic Times, at least $7 billion in orders for equal quantities of seven and ten-year bonds with interest rates of 3.375 percent and 3.625 percent were placed in the competition.
According to the publication, an anonymous source claims that the interest rates were lower than Coinbase’s first bids, implying that buyers have a higher opinion of the company’s creditworthiness than the exchange previously believed.
Bloomberg Intelligence analyst Julie Chariell said, “The huge demand is certainly a big endorsement from debt investors.”
The exchange’s bonds, on the other hand, were rated one notch below investment-grade, with Bloomberg bond indexes indicating that similar debt issues fetch an average yield of 2.86 percent.
Junk bonds are corporate bonds issued by companies with a credit rating that is not investment-grade. Junk bonds have a higher interest rate than investment-grade corporate bonds because of their lower credit rating.
On Sept. 13, Coinbase launched its debt offering, claiming that the cash will be used for “continued product development” as well as “potential investments in or acquisitions of other companies, products, or technologies” that the company may identify in the future.
Coinbase is only the second large cryptocurrency company to issue a junk bond, with MicroStrategy Inc. issuing $500 million in notes to fund more Bitcoin accumulation after the markets fell in June.
Coinbase’s COIN stock recently traded at $243, down from a high of $342 on its first day. COIN, on the other hand, has increased by nearly 20% since late June.
Despite the US Securities and Exchange Commission (SEC) threatening to take legal action against Coinbase if it launches a USDC loan product, market sentiment has suddenly turned optimistic.
The exchange had planned to launch its crypto lending product ‘Lend’ in only “a few weeks” before the SEC issued its warning.