I still remember Coinbase didn't want to share their Proof of Reserves because they really value all the info about their customers, like how much stuff they have on Coinbase [6]. Now that some of that info has been leaked, it feels like anything could happen, even stuff Coinbase might not expect or be able to handle.
Proof of reserve does not have anything to do with users privacy, what that has to do with it is accepting KYC and the second is sharing the KYC information with third parties and also data breaches.
This makes me a bit worried about a possible black swan event down the road if Coinbase gets hit with a big attack and over 2.5 million BTC get stolen from their control. Coinbase is so big now that if it went under, it could be even worse than when Mt Gox collapsed, and they only held around 850K BTC [7].
Coinbase likely have more protection for users coins that data but there is possibility of hack on any crypto exchange at anytime. It is very important not to leave your coins on an exchange.
Could Coinbase's collapse drag the entire crypto market into a new crisis?
The market will fall and survives it. Even the market survived Bybit hack as if nothing happened because other exchanges supported as they do not want the crypto market suffer.