The price of Bitcoin soared 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 sudden rise in interest. However, Coinbase is not interested in taking its crypto earnings for granted. To stay ahead in a much larger market for cryptocurrencies, the company is reinvesting funds in its master plan. As of 2017, the company had reported revenue of $1 billion and more than $150 billion in assets traded across 20 million customers.
San Francisco-based Coinbase is known as the leading cryptocurrency exchange in the US and with its continued success, it ranked 10th on CNBC Disruptor’s list in 2018 after failing to make the list in the past two years. .
On their way to success, Coinbase has spared no effort in poaching key CEOs from the New York Stock Exchange, Twitter, Facebook and LinkedIn. This year, her full-time engineering team has nearly doubled in size.
Coinbase bought Earn.com in April for $100 million. This platform allows users to send and receive digital currencies while replying to mass market emails and completing small tasks. Currently, the company plans to bring on former venture capitalist Andreessen Horowitz, Earns’ founder and CEO, as its first-ever CTO.
At the current valuation, Coinbase valued itself at around $8 billion when it began buying Earn.Com. This value is well above the $1.6 billion valuation estimated in the last round of venture capital funding in the summer of 2017.
Coinbase declines to comment on its valuation despite the fact that it has more than $225 million in funding from major venture capitalists including Union Square Ventures and Andreessen Horowitz, as well as from the New York Stock Exchange.
To meet the needs of institutional investors, the New York Stock Exchange is planning to start its own cryptocurrency exchange. Nasdaq, a rival to the New York Stock Exchange, is also considering a similar move.
• The competition is coming
As competing organizations look to capitalize on Coinbase’s business, Coinbase is looking at other opportunities for venture capital in an effort to build a moat around the company.
Dan Dolev, a spot analyst at Nomura, said Square, a company run by Twitter CEO Jack Dorsey, could feed into Coinbase’s exchange business because it began trading cryptocurrency on the Square Cash app in January.
According to Dolev’s estimates, Coinbase’s trading fees averaged around 1.8 percent in 2017. These higher fees may drive users to other, cheaper exchanges.
Coinbase is looking to become a one-stop shop for institutional investors while hedging the exchange’s business. To attract the white glove class of investors, the company announced a fleet of new products. This category of investors has been particularly wary of diving into the volatile cryptocurrency market.
Coinbase Prime, Coinbase Institutional Coverage Group, Coinbase Custody and Coinbase Markets are the products launched by the company.
Coinbase feels that there are billions of dollars of institutional money that can be invested in digital currency. It already has a custody of $9 billion in customer assets.
Institutional investors are concerned about security despite knowing that Coinbase has never been hacked like some other global cryptocurrency exchanges. Coinbase’s president and chief operating officer said that the motivation behind launching the custody service on Coinbase last November was the lack of a trusted custodian to protect their crypto assets.
• Wall Street is now switching from Bashing Bit to Cryptocurrency Backer
According to the latest available data from Autonomous Next Wall Street, it appears that interest in cryptocurrencies is on the rise. At the moment, there are 287 crypto hedge funds, while in 2016, there were only 20 crypto hedge funds. Goldman Sachs has even opened a cryptocurrency trading desk.
Coinbase also introduced Coinbase Ventures, an incubator fund for early-stage startups working in the cryptocurrency and blockchain space. Coinbase Ventures has already raised $15 billion in further investments. Its first investment was announced in a startup called Compound which allows one 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 company is BitPlay, which recently raised $40 million in venture funds. 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, you will reduce costs and create a decentralized financial solution.
• Regulatory security remains intense
For keeping access limited to four cryptocurrencies, Coinbase has drawn a lot of criticism. But they must tread carefully as US regulators deliberate on how to monitor certain uses of the technology.
For cryptocurrency exchanges such as Coinbase, what is worrisome is whether cryptocurrencies are securities that fall under the jurisdiction of the SEC. Admittedly, Coinbase has been slow to add new coins because the SEC announced in March that it would enforce security laws on all cryptocurrency exchanges.
The Wall Street Journal reports that Coinbase has met with SEC officials to register itself as a licensed brokerage and electronic trading venue. In such a scenario, it would be easier for Coinbase to support more coins and also comply with the security regulations.