In 2017, the price of bitcoin skyrocketed. Coinbase, one of the largest cryptocurrency exchanges in the world, was in the right place at the right time to capitalize on the surge in interest. Nonetheless, Coinbase isn’t about to take its crypto gains for granted. To stay competitive in a much larger cryptocurrency market, the company is reinvesting in their master plan. Until 2017, the company’s revenue was reported to be $1 billion, with over $150 billion in assets traded among 20 million customers.
Coinbase, based in San Francisco, is known as the leading cryptocurrency trading platform in the United States, and with its continued success, landed at No. 10 on the CNBC Disruptor list in 2018, after failing to make the list the previous two years.
Coinbase has left no stone unturned in their pursuit of success, hiring key executives from the New York Stock Exchange, Twitter, Facebook, and LinkedIn. The size of its full-time engineering team has nearly doubled in the current year.
Coinbase paid $100 million for Earn.com in April. Users can send and receive digital currency while responding to mass market emails and completing microtasks on this platform. Currently, the company is planning to hire Earns founder and CEO, a former Andreessen Horowitz venture capitalist, as its first-ever chief technology officer.
When it set out to buy Earn.Com, Coinbase valued itself at around $8 billion, according to current valuation. This is a much higher valuation than the $1.6 billion estimated at 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 received more than $225 million in funding from top venture capital firms such as Union Square Ventures, Andreessen Horowitz, and the New York Stock Exchange.
The New York Stock Exchange intends to launch its own cryptocurrency exchange in order to meet the needs of institutional investors. Nasdaq, NYSE’s rival, is also considering a similar move.
Competition is on the way
As competitors look to take a bite out of Coinbase’s business, Coinbase is looking to other venture capital opportunities to help build a moat around the company.
Nomura instant analyst Dan Dolev believes Square, run by Twitter CEO Jack Dorsey, could eat into Coinbase’s exchange business because it began trading cryptocurrency on its Square Cash app in January.
According to Dolev’s estimates, Coinbase’s average trading fees in 2017 were around 1.8 percent. Fees this high may drive users to other, less expensive exchanges.
Coinbase aims to become a one-stop shop for institutional investors while also hedging its exchange business. The company announced a slew of new products to entice the white glove investor class. This group of investors has been particularly hesitant to enter the volatile cryptocurrency market.
The company’s products include Coinbase Prime, The Coinbase Institutional Coverage Group, Coinbase Custody, and Coinbase Markets.
Coinbase believes that institutional money worth billions of dollars can be invested in digital currency. It already has $9 billion in customer assets under its custody.
Despite the fact that Coinbase has never been hacked, unlike some other global cryptocurrency exchanges, institutional investors are concerned about security. The lack of a trusted custodian to safeguard their crypto assets was the impetus for Coinbase’s launch of the Coinbase custody last November, according to the company’s president and COO.
Currently, Wall Street has shifted from being a critic of Bitcoin to a supporter of cryptocurrency.
According to the most recent data from Autonomous Next Wall Street, interest in cryptocurrency appears to be growing. There are currently 287 cryptocurrency hedge funds, whereas there were only 20 cryptocurrency hedge funds in 2016. Even Goldman Sachs has a cryptocurrency trading desk.
Coinbase has also launched Coinbase Ventures, a seed fund for early-stage startups in the cryptocurrency and blockchain space. Coinbase Ventures has already amassed $15 billion in capital for future investments. Its first investment was announced in Compound, a startup that allows users to borrow or lend cryptocurrency while earning interest.
Coinbase Commerce, which allows merchants to accept major cryptocurrencies as payment, was launched at the beginning of 2018. BitPlay, another bitcoin startup, recently raised $40 million in venture capital. BitPlay processed over $1 billion in bitcoin payments last year.
Proponents of blockchain technology believe that cryptocurrency will be able to eliminate the need for central banking authorities in the future. It will lower costs and create a decentralized financial solution as a result of this process.
Regulatory Security Is Still Tight
Coinbase has received a lot of flak for restricting access to only four cryptocurrencies. However, they must tread carefully while US regulators consider how to police specific uses of the technology.
The issue for cryptocurrency exchanges like Coinbase is whether cryptocurrencies are securities that are subject to Securities and Exchange Commission jurisdiction. Coinbase has admittedly been slow to add new coins because the SEC announced in March that it would apply security regulations to all cryptocurrency exchanges.
According to the Wall Street Journal, Coinbase met with SEC officials to register as a licensed brokerage and electronic trading venue. In such a case, Coinbase would find it easier to support more coins while also complying with security regulations.
Cryptocurrency markets are extremely volatile; therefore, if you want to know the best cryptocurrency to buy now, do your homework or join a cryptocurrency research center that can advise you on the fundamentals and which coins are poised for a positive move.