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 take advantage of the spike in interest. However, Coinbase is not interested in taking its crypto profits for granted. To stay ahead in a much larger cryptocurrency market, the company is investing money back into its master plan. By 2017, the company’s revenue was reported at $1 billion and over $150 billion in 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 consistent success, it landed at number 10 on CNBC’s 2018 Disruptor list after failing to make the list in the previous two years.
On its way to success, Coinbase 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.
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. The company is currently planning to appoint former Andreessen Horowitz venture capitalist, founder and CEO of Earns as its first chief technology officer.
According to the current valuation, Coinbase is valued at around $8 billion when it decides to buy Earn.Com. That value is much higher than the $1.6 billion valuation it was valued at in the last round of venture capital funding in the summer of 2017.
Coinbase declined to comment on its valuation despite the fact that it has more than $225 million in funding from top venture capital firms, including Union Square Ventures, Andreessen Horowitz, and the New York Stock Exchange.
To meet the needs of institutional investors, the New York Stock Exchange plans to launch its own cryptocurrency exchange. Nasdaq, a rival of the NYSE, is also considering a similar move.
• Competition is coming
As rival organizations look to take a bite out of Coinbase’s business, Coinbase is looking to other venture capital opportunities in an effort 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 absorb Coinbase’s exchange business as it began trading cryptocurrency on its Square Cash app in January.
According to Dolev’s estimates, Coinbase’s average trading fees were roughly 1.8 percent in 2017. Fees that high could drive users to other cheaper exchanges.
Coinbase aims to become a one-stop shop for institutional investors while hedging its exchange business. To attract this class of white-glove investors, the company announced a range of new products. This class of investors was especially cautious when 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 believes there are billions of dollars of institutional money that could be invested in the digital currency. It already holds $9 billion in client assets.
Institutional investors are concerned about security, even though they know Coinbase has never been hacked like some other global cryptocurrency exchanges. Coinbase’s president and COO said the impetus for launching Coinbase Custody last November was the lack of a trusted custodian to protect their crypto assets.
• Wall Street is currently moving from Bashing Bit to Cryptocurrency Backer
According to the latest data available from Autonomous Next Wall Street’s, interest in the cryptocurrency appears to be growing. There are currently 287 crypto hedge funds, while in 2016 there were only 20 cryptocurrency hedge funds. Goldman Sachs even opened a cryptocurrency trading desk.
Coinbase also introduced Coinbase Ventures, which is an incubator fund for early-stage startups working in the cryptocurrency and blockchain space. Coinbase Ventures has already raised $15 billion for further investment. His first investment was announced in a startup called Compound, which allows one to borrow or lend cryptocurrency 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, it will reduce costs and create a decentralized financial solution.
• Regulatory certainty remains intense
For keeping access limited to four cryptocurrencies, Coinbase has drawn a lot of criticism. But they must tread carefully as US regulators consider how to control certain uses of the technology.
For cryptocurrency exchanges like Coinbase, the issue is whether cryptocurrencies are securities that would fall under the jurisdiction of the Securities and Exchange Commission. Coinbase has been really slow to add new coins since the SEC announced in March that it would apply security laws to all cryptocurrency exchanges.
The Wall Street Journal reported that Coinbase has met with SEC officials to register as a licensed intermediary and electronic trading venue. In such a scenario, it will become easier for Coinbase to support more coins and also comply with security regulations.