The price of bitcoin soared in 2017. Coinbase, one of the world’s largest cryptocurrency exchanges, was in the right place at the right time to capitalize on the spike in interest. Even so, Coinbase isn’t interested in taking its crypto earnings for granted. To stay ahead in a much larger cryptocurrency market, the company is back in its master plan. Until 2017, the company’s revenues were reported at $1 billion and more than $150 billion of assets were exchanged in 20 million customers.
Coinbase, a company based in San Francisco, is known as the leading cryptocurrency trading platform in the United States and with its continued success, it landed at the No. 10 spot on the CNBC Disruptor list in 2018 after having failed to make the list 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. Currently, the company plans to bring in a former Andreessen Horowitz venture capitalist, Earns founder and CEO as its first chief technology officer.
According to the current valuation, Coinbase was valued at about $8 billion when it started buying Earn.Com. This value is much higher than the $1.6 billion valuation that was estimated at the last round of venture capital funding 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 leading VCs including Union Square Ventures, Andreessen Horowitz and even 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 of NYSE is also considering a similar move.
• The competition has arrived
As competing organizations look to take a bite out of Coinbase’s business, Coinbase is looking for other venture capital opportunities in an attempt to build a moat around the company.
Dan Dolev, an instant analyst at Nomura, said that Square, a company run by Twitter CEO Jack Dorsey could eat into Coinbase’s exchange business because it started exchanging cryptocurrency in its Square Cash app in January.
According to Dolev’s estimates, Coinbase’s average trading fees were about 1.8 percent in 2017. Such high fees 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 lure in that class of white-glove investors, the company is announcing a raft of new products. This class of investors has been particularly cautious to dive 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 concerned about security despite knowing that Coinbase has never suffered a hack like some other global cryptocurrency exchanges. Coinbase’s president and COO said that the impetus for launching Coinbase custody last November was the lack of trusted custody to safeguard its crypto assets.
• Currently Wall Street Shifts from Bashing Bit to Cryptocurrency Backer
According to the latest data available from Autonomous Next Wall Street’s, interest in cryptocurrency appears to be growing. Currently, there are 287 crypto hedge funds, while in 2016, there were only 20 cryptocurrency hedge funds that existed. Goldman Sachs has also 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 that allows you to borrow or lend cryptocurrency while earning an interest rate.
At the beginning of 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.
The proponents of blockchain technology believe that in the future, cryptocurrency will be able to eliminate the need for central banking authority. In the process, it will lower costs and create a decentralized financial solution.
• Regulatory Security Remains Intense
For keeping access limited to four cryptocurrencies, Coinbase has attracted a lot of criticism. But they should tread carefully as US regulators deliberate how to police certain uses of the technology.
For cryptocurrency exchanges like Coinbase, the matter of concern is whether or not cryptocurrencies are securities that will be subject to the jurisdiction of the Securities and Exchange Commission. Coinbase is admittedly 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 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 also to comply with security rules.