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 take advantage of the spike in interest. Despite this, Coinbase is not interested in taking its crypto profits for granted. To stay ahead of the much larger cryptocurrency market, the company is pouring money back into its master plan. By 2017, the company’s revenues were $1 billion and more than $150 billion in assets traded with 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 made it to the 10th spot on the CNBC Disruptor 2018 list after failing to make the list the previous two years.
On its way to success, Coinbase left no stone unturned in its pursuit of key executives from the New York Stock Exchange, Twitter, Facebook and LinkedIn. In the current year, the number of the full-time engineering team has almost doubled.
Earn.com bought 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 bring in former Andreessen Horowitz founder and CEO Andreessen Horowitz as its first chief technology officer.
According to current estimates, Coinbase was valued at around $8 billion when it moved to buy Earn.Com. This value is significantly higher than the estimate of $1.6 billion that was estimated in the last round of venture capital financing in the summer of 2017.
Coinbase refuses to comment on its valuation despite the fact that it has more than $225 million in funding from top VCs, 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 launch its own cryptocurrency exchange. Nasdaq, a competitor of the NYSE, is also considering a similar move.
• Competition is coming
As competing organizations look to take a bite out of Coinbase’s business, Coinbase is looking to other venture capital opportunities in an attempt to build a moat around the company.
Dan Dolev, an instant analyst at Nomura, said Square, the company run by Twitter CEO Jack Dorsey, could get into the business of exchange Coinbase because 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. Such high fees could drive users to other cheaper exchanges.
Coinbase aims to become a one-stop destination for institutional investors while protecting its exchange business. To attract the white-glove investor class, the company announced a fleet of new products. This class of investors has been particularly cautious about diving into the volatile cryptocurrency market.
Coinbase Prime, The Coinbase Institutional Coverage Group, Coinbase Custody and Coinbase Markets are products launched by the company.
Coinbase believes that there are billions of dollars of institutional money that can be invested in the digital currency. It already has custody of $9 billion in client assets.
Institutional investors are concerned about security even though they know that Coinbase has never been hacked like some other global cryptocurrency exchanges. The president and COO of Coinbase said that the impetus for starting the Custody of Coinbase last November was the lack of a reliable custodian to guard their crypto assets.
• Currently, Wall Street is moving from Bashing Bit to Cryptocurrency Supporter
According to Autonomous Next Wall Street’s latest data available, interest in cryptocurrencies appears to be on the rise. 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 field of cryptocurrency and blockchain. Coinbase Ventures has already accumulated $15 billion for further investments. His first investment was announced in a startup called Compound that allows borrowing or lending 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 capital. 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 security remains intense
For restricting access to four cryptocurrencies, Coinbase has drawn a lot of criticism. But they must be careful as US regulators consider how to control certain uses of the technology.
For cryptocurrency exchanges like Coinbase, the question is whether or not cryptocurrencies are securities under the jurisdiction of the Securities and Exchange Commission. Coinbase has admittedly been 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 met with SEC officials to register as a licensed brokerage and electronic trading venue. In such a scenario, it would become easier for Coinbase to support more coins and comply with security regulations.