In 2017, the price of bitcoin rose rapidly. Coinbase, one of the world’s largest cryptocurrency exchanges, was in the right place at the right time to take advantage of the interest rate hike. However, Coinbase is not interested in taking cryptocurrency earnings for granted. To stay ahead of the larger cryptocurrency market, the company is raising money for its master plan. As of 2017, the company’s revenue was reported at $1 billion, and over $150 billion in assets were traded between 20 million clients.
San Francisco-based Coinbase is recognized as the leading cryptocurrency trading platform in the US, and its continued success has earned it the 10th spot on the CNBC Disruptor list for 2018 after failing to make the list for 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. Its full-time engineering staff has almost doubled this year.
Earn.com was acquired by Coinbase for $100 million in April of this year. This platform allows users to send and receive digital currency while responding to mass market emails and completing microtasks. Currently, the company plans to bring in former Andreessen Horowitz venture capitalist, Earns founder and CEO, as its first chief technology officer.
At the current valuation, Coinbase valued itself at around $8 billion when it was set to acquire Earn.Com. This value is significantly higher than the estimated valuation of $1.6 billion in the last round of venture capital funding in the summer of 2017.
Coinbase declines to comment on the valuation despite having 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 open its own cryptocurrency exchange. Nasdaq, the NYSE’s rival, is considering a similar move.
• Competition is coming
As competing organizations look to get a piece of Coinbase’s business, Coinbase is looking for other venture capital opportunities to build a moat around the company.
Nomura analyst Dan Dolev said Square, run by Twitter CEO Jack Dorsey, could acquire Coinbase’s exchange business as it launched cryptocurrency trading in its Square Cash app in January.
Coinbase’s average trading fees were about 1.8 percent in 2017, according to Dolev’s calculations. Such high fees may drive users to cheaper exchanges.
Coinbase wants to become a one-stop shop for institutional investors while hedging the exchange business. To attract this class of white-glove investors, the company announced a fleet of new products. This class of investors has been particularly wary of entering the volatile cryptocurrency market.
Coinbase Prime, The Coinbase Institutional Coverage Group, Coinbase Custody and Coinbase Markets are products offered by the company.
Coinbase feels that there are billions of dollars of institutional money that can be invested in digital currency. It already has $9 billion in client assets.
Institutional investors are concerned about security, even though they know Coinbase has never been hacked like some other global cryptocurrency exchanges. The Coinbase president and COO said that the lack of a reliable custodian to protect crypto assets was the impetus for the start of Coinbase custody last November.
• Right now Wall Street is going from Bashing Bit to Cryptocurrency Backer
Interest in cryptocurrency is on the rise, according to recent data from Autonomous Next Wall Street. There are currently 287 cryptocurrency hedge funds, compared to only 20 in 2016. Goldman Sachs has even opened a cryptocurrency trading desk.
Coinbase also launched Coinbase Ventures, an incubator fund for early-stage startups working in the cryptocurrency and blockchain space. Coinbase Ventures has already raised $15 billion in additional investments. His first investment was announced in Compound, a startup that allows you to borrow or lend 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 Safety Remains Strong
Coinbase has come under a lot of criticism for limiting access to four cryptocurrencies. But as US regulators consider how to manage certain uses of the technology, they must tread carefully.
A concern for cryptocurrency exchanges like Coinbase is whether cryptocurrencies are securities subject to the jurisdiction of the Securities and Exchange Commission. Coinbase has been slow to add new coins since the SEC announced in March that it would impose security laws on all cryptocurrency exchanges.
The Wall Street Journal reported that Coinbase is meeting with SEC officials to register as a licensed broker and electronic trading venue. In such a scenario, it will be easier for Coinbase to support more coins and also comply with security regulations.