Coinbase: a Bitcoin startup is expanding to capture more market
Posted On May 26, 2021
The price of bitcoin skyrocketed in 2017. Coinbase, one of the largest cryptocurrency exchanges in the world, was in the right place at the right time to capitalize on the interest spike. Even so, Coinbase is not interested in taking your crypto earnings for granted. To stay ahead of a much larger cryptocurrency market, the company is pouring money into its master plan. Through 2017, the company’s revenue was reported at $ 1 billion and more than $ 150 billion of assets were traded among 20 million clients.
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 No. 10 on CNBC’s disruptors list in 2018 after failing to be on the list for the previous two years. .
On its way 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 almost doubled.
Earn.com was bought by Coinbase this April for $ 100 million. This platform allows users to send and receive digital currency while responding to mass market emails and completing micro tasks. Currently, the company plans to recruit a former venture capitalist from Andreessen Horowitz, founder and CEO of Earns as its first CTO.
Based on the current valuation, Coinbase was valued 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 venture capital financing in the summer of 2017.
Coinbase declines to comment on its valuation even though it has more than $ 225 million in funds from major venture capitalists, including Union Square Ventures, Andreessen Horowitz, and also 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.
• Competition is coming
As competing organizations look to take advantage of Coinbase’s business, Coinbase is seeking other venture capital opportunities in an attempt to build a moat around the company.
Dan Dolev, an instant analyst at Nomura, 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 estimates, Coinbase’s average trading fees were roughly 1.8 percent in 2017. Such high fees could lead users to other, cheaper exchanges.
Coinbase seeks to become a one-stop shop for institutional investors while protecting 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 cautious about diving into the volatile market for cryptocurrencies.
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 digital currency. It already has custody of $ 9 billion in client assets.
Institutional investors are concerned about security despite knowing that Coinbase has never suffered an attack like other global cryptocurrency exchanges. Coinbase’s president and chief operating officer said the impetus for launching custody of Coinbase last November was the lack of a trusted custodian to safeguard its crypto assets.
• Currently, Wall Street goes from Bashing Bit to Backer of cryptocurrencies
Based on the latest data available from Autonomous Next Wall Street, interest in cryptocurrencies appears 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 incubator fund for early stage startups working in the cryptocurrency and blockchain space. Coinbase Ventures has already accumulated $ 15 billion for new investments. His first investment was announced in a startup called Compound that allows one to borrow or lend cryptocurrencies while earning an interest rate.
In early 2018, the company launched Coinbase Commerce, which allows merchants to accept major cryptocurrencies for payment. Another bitcoin startup was BitPlay, which recently raised $ 40 million in venture money. Last year, BitPlay processed more than $ 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 financial solution.
• Regulatory security remains intense
To keep access limited to four cryptocurrencies, Coinbase has received a lot of criticism. But they must exercise caution as US regulators deliberate on how to monitor certain uses of the technology.
For cryptocurrency exchanges like Coinbase, the reason for concern is whether cryptocurrencies are securities that would be subject to the jurisdiction of the Securities and Exchange Commission. It’s 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 causes SEC officials to register as a licensed brokerage and e-commerce venue. In such a scenario, it would be easier for Coinbase to support more coins and also comply with security regulations.