Coinbase: A Bitcoin startup is reaching out to capture more of the market
The price of bitcoin skyrocketed in 2017. Coinbase, one of the world’s largest cryptocurrency exchanges, was in the right place at the right time to capitalize on the surge in interest. Even so, Coinbase is not interested in taking its crypto earnings for granted. To stay ahead in a much larger cryptocurrency market, the company is reinvesting money into its master plan. Through 2017, the company’s revenue was reported at $1 billion and more than $150 billion in assets were traded among 20 million customers.
Coinbase, a San Francisco-based company, is known as the leading cryptocurrency trading platform in the United States and with its continued success, it landed at #10 on CNBC’s list of disruptors in 2018 after failing to win. managed to make the list the previous two years. .
On its path to success, Coinbase has left no stone unturned in poaching key executives from the New York Stock Exchange, Twitter, Facebook, and LinkedIn. In the current year, the size of its full-time engineering team has nearly doubled.
Coinbase bought Earn.com this April for $100 million. This platform allows users to send and receive digital currency while responding to mass emails and completing micro-tasks. Currently, the company plans to bring in a former venture capitalist from Andreessen Horowitz, founder and CEO of Earns, as its first CTO.
At current valuation, Coinbase valued itself at around $8 billion when it set out to buy Earn.Com. This value is much higher than the $1.6 billion valuation that was estimated in the last round of VC funding in the summer of 2017.
Coinbase declines to comment on its valuation even though it has more than $225 million in funding from top VCs including Union Square Ventures, Andreessen Horowitz, and also from the New York Stock Exchange.
To meet the needs of institutional investors, the New York Stock Exchange plans to start its own cryptocurrency exchange. Nasdaq, a rival to the NYSE, is also contemplating a similar move.
• The competition is coming
As competing organizations look to take a bite out of Coinbase’s business, Coinbase is seeking other venture capital opportunities in an attempt to build a moat around the company.
Dan Dolev, a Nomura Instant analyst, said Square, a company run by Twitter CEO Jack Dorsey, could eat into Coinbase’s exchange business because it started trading cryptocurrencies on its Square Cash app in January.
According to Dolev’s estimates, Coinbase’s average trading fees were about 1.8 percent in 2017. Fees that high could drive users to other, cheaper exchanges.
Coinbase is looking to become a one stop shop for institutional investors while covering its exchange business. To attract that class of white-collar investors, the company announced a fleet of new products. This class of investors has been especially wary of diving into the volatile cryptocurrency market.
Coinbase Prime, The Coinbase Institutional Coverage Group, Coinbase Custody, and Coinbase Markets are the products launched by the company.
Coinbase feels that there are billions of dollars in institutional money that can be invested in the digital currency. It already has custody of $9 billion in client assets.
Institutional investors are worried about security despite knowing that Coinbase has never been hacked like other global cryptocurrency exchanges. Coinbase’s president and COO said the impetus for Coinbase’s custody launch last November was the lack of a trusted custodian to safeguard its crypto assets.
• Currently, Wall Street shifts from an attack bit to a cryptocurrency sponsor
According to the latest available data from Autonomous Next Wall Street, interest in cryptocurrencies seems to be increasing. Currently, there are 287 cryptocurrency hedge funds, while in 2016 there were only 20 cryptocurrency hedge funds. Goldman Sachs has even opened a cryptocurrency trading desk.
Coinbase has also introduced Coinbase Ventures, which is an incubation fund for early-stage startups working in the cryptocurrency and blockchain space. Coinbase Ventures has already accumulated $15 billion for future investment. His first investment was announced in a startup called Compound that allows you to borrow or lend cryptocurrency while earning an interest rate.
In early 2018, the company launched Coinbase Commerce, which allows merchants to accept all major cryptocurrencies for payments. Another bitcoin startup was BitPlay, which recently raised $40 million in venture capital. Last year, BitPlay processed over $1 billion in bitcoin payments.
Proponents of blockchain technology believe that in the future, cryptocurrency will be able to eliminate the need for central banking authorities. In the process, you will reduce costs and create a decentralized finance solution.
• Regulatory certainty remains intense
For keeping access limited to four cryptocurrencies, Coinbase has received a lot of criticism. But they must tread carefully as US regulators deliberate how to police certain uses of the technology.
For cryptocurrency exchanges like Coinbase, the concern is whether or not cryptocurrencies are securities that would be subject to the jurisdiction of the Securities and Exchange Commission. It is true that Coinbase is slow to add new coins because the SEC announced in March that it would apply security laws to all cryptocurrency exchanges.
The Wall Street Journal reported that Coinbase is asking SEC officials to register as a licensed e-commerce and brokerage center. In such a scenario, it would be easier for Coinbase to support more coins and also comply with security regulations.