Back in November 2021, cryptocurrencies, which saw a huge surge during most of the pandemic, suddenly began to nosedive. Joe Hovde, a New York-based data scientist, decided that this might be his moment to buy into crypto: He took a risk on the price plunge and bought some Ethereum, the next most popular crypto asset after Bitcoin, on Coinbase, a crypto exchange.
A couple of months later, Hovde started getting emails from Coinbase notifying him of swings in the prices of Ethereum, Bitcoin, and other tokens. “Price alert: Ethereum (ETH) is down -4.90%” read the subject line of one. The body of the email greeted Hovde (“Hi Joe”) and elaborated on the current price of Ethereum and the timing of the -4.9% drop: It had happened within the last 12 hours. Though already a steady consumer of financial news and current events, Hovde used the notifications to passively keep tabs on his investment while juggling other things. So when crypto assets began to take another nosedive in April 2022, Hovde noticed that at some point, the emails seemed to have stopped coming.
Hovde, who has worked on projects culling trends and patterns from large data sets for both tech companies and media outlets, scraped his inbox and confirmed that he’d received no emailed price notifications from the end of February to when they started back up again at the beginning of June; during that time period, Bitcoin, Ethereum, and other currencies lost dozens of percent worth of value in the thousands and tens of thousands of dollars.
Coinbase’s decision to stop email notifications in the middle of a dramatic cryptocurrency crash has not been previously reported. But academics who spoke to Mother Jones note that Coinbase’s decision likely contributed to losses for retail crypto investors who may otherwise have sold their holdings ahead of further devaluation. The change to price updates could run afoul of federal or state consumer protection laws, they said, particularly if it hurt the wallets of any of the relatively inexperienced traders who flocked to crypto in droves during the pandemic
Coinbase confirmed to Mother Jones that they began testing email price alerts in January on a subset of customers but declined to elaborate on what proportion of its users were in the test pool. The company explained that they stopped this testing around February, temporarily pausing alerts before reintroducing them to all users several months later. Based on Hovde’s emails and posts on social media by people who received the emails, the alerts appear to have been introduced to all users in June, meaning there was a likely gap in price updates this spring from February through May.
“We began testing email notifications for some users in January, and have since rolled out email notifications for all interested users,” Coinbase spokesperson Crystal Yang said in an emailed statement. She did not elaborate on the specifics of when emails were turned off and then back on.
Hovde said that he did not receive a notification that the email service would be ending, and there are no posts on Coinbase’s blog about the change. Coinbase did not respond to questions about whether it had notified users in the test pool ahead of stopping their notifications.
Hovde’s portfolio wasn’t significantly impacted by the ceased alerts, he says, but ethics experts worry about those who might be.
“It’s potentially illegal,” Matthew Bruckner an associate professor at Howard University who specializes in business law, told Mother Jones. Bruckner suspected that the practice might have run afoul of Unfair and Deceptive Practice or UDAP laws, which are state rules that prohibit deception of consumers. “It could be unfair to do this, to sort of induce people to rely on the email alerts,” Bruckner explained, saying that if Coinbase started and stopped email alerts without properly notifying users and that this was proven to have “caused substantial injury” like financial losses, that could present an issue.
“This seems straight up deceptive,” he said. “They said we’ll email you price alerts and then stopped doing it without saying they were [going to stop].” Depending on the specifics of what Coinbase promised and communicated to users, Bruckner said that affected users could have grounds to sue Coinbase if users who got the emails then stopped checking crypto values elsewhere, leading them to lose out once prices began to fall just as emails disappeared. “It seems plausible that they could have caused damages by inducing users to stop using other methods of checking prices by introducing emailed price alerts, and then taking them away.” But Bruckner added the caveat that more details would be needed about exactly what assurances Coinbase made to users who received the email notifications. In an email, Coinbase declined to comment on the question of any legal issues raised by their email notifications.
Bruckner also noted that even if Coinbase wasn’t sued, it’s not necessarily in the clear. “If they caused harm to people who didn’t sell crypto that they would have sold, that is potentially actionable by regulators,” depending on the size of the pool of users tested, he said.
Benjamin Edwards, an associate professor of law at the University of Las Vegas Nevada, told Mother Jones over email that some state UDAP laws include provisions that explicitly prohibit companies from misleading consumers through the omission of substantive information—like, for instance, neglecting to tell customers of a halt on price update emails just as the crypto market tanked.
“It would not surprise me to see arguments that Coinbase’s failure to notify customers that it would arbitrarily pause providing price alerts during a market decline constitutes a material omission,” Edwards said. “Some of those customers might have closed their positions earlier if Coinbase had alerted them.”
Edwards also noted that if a traditional brokerage firm had done this, they would have likely been penalized by the Financial Industry Regulatory Authority (FINRA), a private self-regulatory organization for financial institutions. Cryptocurrency exchanges and cryptocurrencies are regulated, but the question of which agencies should have jurisdiction over them is still being hashed out, which means the industry is still not as tightly scrutinized as traditional finance.
“When [Coinbase] promises things like price alerts to customers, it does this to make itself an attractive trading venue,” Edwards said over email. If customers are relying on the price alerts to inform their trading decisions, then “it’s not a fair business practice to suddenly change the rules without any notice to the customers.”
In response to questions about whether it might have violated UDAP laws by quietly pausing its emailed price updates, Coinbase spokesperson Crystal Yang said in an emailed statement that “All Coinbase customers have the option to be notified about certain changes to asset prices on their watchlist through push and in-app notifications.” She added that even when email notifications were paused, “users continued to receive push and in-app notifications, if so elected.”
Thoughtful investing is time-intensive, and people who are the shortest on money often have the least amount of free time to devote to watching markets and keeping up with financial news. This can make them especially likely to act on the communications they receive from the platforms where they invest.
In August 2021, for example, Coinbase accidentally sent an email to 125,000 users telling them that their two-factor authentication settings had changed, leading users to believe that their accounts were being compromised. At least one claimed that they had sold crypto in response to the notification to avoid what they thought was a hack.
Price updates, especially on a volatile asset prone to aggressive swings, can be useful to those who don’t have the ability to keep up with the minutiae of markets, helping them to make sound decisions on their investments to avoid major losses.
From April 3 to 5, for example, the price of Ethereum dropped by 10 percent. Days later, from April 9 to 10 it dropped another 7 percent. It’s conceivable that notifications of these significant price drops could have prompted an investor to sell and helped them to avoid thousands of dollars in losses in the coming months: Ethereum started a precipitous and sustained drop in May that cut its value by 66 percent.
Not everyone agrees that price notifications are good for consumers, though. James Tierney, a law professor at the University of Nebraska College of Law who focuses on stock market regulation and corporate law, argued over email that increased push notifications can harm investors.
“App designers use push notifications and other practices to keep our attention engaged, and that’s true in trading and portfolio apps too,” he told me. “But ordinary people often don’t benefit from having our attention drawn to trading.” Research, he pointed out, shows unsophisticated retail investors often undermine their own portfolios by trading frequently, instead of holding investments for long periods of time.
A solution could be to limit notifications of all kinds—email, push, or others—or never make them available to begin with. But seemingly inconsistent offerings deprive users of the information they think they’re getting and give them the worst of both worlds.