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 rise in interest. Even so, Coinbase isn’t interested in taking its crypto gains 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 revenue was $1 billion, and over $150 billion in assets were traded by over 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 was ranked 10th on the CNBC Disruptor list in 2018 after failing to make the list for 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 size of its full-time engineering team has nearly doubled.
Earn.com acquired 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 venture capitalist Earns founder and CEO as its first chief technology officer.
According to current estimates, Coinbase valued itself at around $8 billion when it moved to acquire Earn.Com. This value is much higher than the $1.6 billion value that was estimated in 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 major VCs, including Union Square Ventures, Andreessen Horowitz and also from 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, the NYSE’s rival, is also considering a similar move.
• Competition is coming
As competing organizations look to take a bite out of Coinbase’s business, Coinbase is seeking other venture capital opportunities in an attempt to build a moat around the company.
Dan Dolev, a Nomura Instant analyst, said Square, the company run by Twitter CEO Jack Dorsey, could eat up Coinbase’s exchange business because it started trading cryptocurrencies 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 fees could drive users to other cheaper exchanges.
Coinbase wants to become a one-stop shop for institutional investors while protecting its exchange operations. To attract investors to that white-glove class, the company announced a fleet 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 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 holds $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 CEO said the impetus for launching Coinbase Custody last November was the lack of a trusted custodian to protect their crypto assets.
• Right now Wall Street is moving from Bashing Bit to Cryptocurrency Backer
According to the latest data available from Autonomous Next Wall Street, 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 cryptocurrency and blockchain space. Coinbase Ventures has already accumulated $15 billion for further investments. His first investment was announced in a startup called Compound that allows lending or borrowing cryptocurrency with interest rate earnings.
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 certainty 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 of concern is whether cryptocurrencies are securities that would fall under the jurisdiction of the Securities and Exchange Commission. However, Coinbase has 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.