Compare Coinbase to say a major exchange like the NYSE. Realize that crypto is a space that could be damaged by gov intervention at any time. Realize that there is very little lock in effect on these markets, and fees are becoming less and less over time.
How does Coinbase ever manage to justify a valuation this high? 100B....
- Government intervention tends to benefit incumbents.
- Coinbase employs a lot of lawyers [1].
- Coinbase invests a lot in lobbying [2].
- While fees are lowering for international exchanges, those who serve US customers are still able to get away with very high fees.
- People are less sensitive to fees when the assets they are buying are very volatile.
- NYSE serves brokers, that then themselves serve the final clients. Coinbase is able to serve customers directly, thus it can keep all the fees for themselves.
There is no way that Coinbase has a stronger lobbying base than the established financial players. They can get into this game, block it with tighter regs, and dig into their deep base of clients to offer similar products. I don’t see a moat here.
The second largest donor to the Biden campaign was SBF, the CEO of FTX, another crypto exchange. The crypto ecosystem is spending a lot of money on lobbying.
Coinbase does things that have no NYSE parallel, for example running a centralized ETH staking service (they keep 50% of the profits, which are 5+% of staked ETH so it's very high margin).
Of course anybody can run a service like that, but Coinbase has the brand name and a leg up on compliance/legal so they'll get to charge a big premium on this stuff.
The difference is that NYSE doesn't make that much in the end by operating the market. Coinbase is crypto first company, has lot of different things going for them. The buy/sell ramp, exchange, they are the defacto listing platform for new coins, they hold assets, they provide custody of assets (which you need as a fund/company) and they are positioned to do almost anything that crypto does. More the crypto industry grows, the more they can grow.Now as a public company they are positioned to acquire companies much more cheaply.
Most companies or banks offering crypto are not really built on it, they are just UI brokerages and buy the coins somewhere else. Same way they handle other assets. The trades are "free" because they take portion on off the spread. They buy a coin for $99 on the market and sell it to you for $100. It's easy to do but something Coinbase didn't want to do because it's not transparent and honest.
Ironically finance and banking institution are the worst at tech. Building on top of crypto is hard. Crypto trading is hard. Crypto security is hard. Financial instigation security is based on the fact that you can always fix things manually, call and fax in changes. That doesn't work for crypto.
And it's not like you can build all these capabilities and the legal framework over night or over months. Competition has been there from the very beginning but they are still the market leader in the western world.
Overall bullish on Coinbase in the long run. It's more of a platform than it is bank or an exchange.
I'm not so sure. Western governments could had intervened and banned or heavily regulated crypto currencies at any time over the past several years. In particular, the Silk Road and Alpha Bay take-downs would have been the perfect opportunities - but they didn't take them.
Now we have crypto currency companies floating as public companies, and others (e.g. Tesla) heavily invested, speculatively, in Bitcoin - maybe crypto currency had now reached a point where it's too big to fail?
OTOH, some western governments and their security apparatus are all-in on mass surveillance and privacy invasion, and they are going to hate any real degree of currency anonymity, so more regulation could still be on the cards, but perhaps in (secret) consultation with the likes of CoinBase. The likes of Monero and Zcash are likely targets.
Bitcoin is perfect for mass surveillance and privacy invasion.
It's as if all transactions, of any size, can be perpetually tracked, with a courtroom-ready digital signature reducing evidence doubt about who made a transaction.
Also, unlike traditional banks, there is absolutely nothing preventing someone from reviewing that transaction record. No need to ask a judge for permission, no need to ask the bank to reveal records, no need to let anyone -- anyone -- know what you are up to.
I believe it takes relatively sophisticated analysis (ie the kind of real world snooping that state actors do) to tie someone to a particular address without them publishing it. Just because there is this huge theoretical vulnerability doesn’t mean most blockchain transactions aren’t secret from even smaller states.
This IPO significantly weakened the "gov will ban it" argument, it's like too big to fail now that it's in the hands of millions of retail and institutional investors alike.
The exchange game as it was with stocks and bonds is all about consolidation (and resulting revenue base). People are betting that coinbase will consolidate the market. I don’t buy it but that’s the “story”.
I'm not bullish on Coinbase, but the upside case is the market cap of Visa, Mastercard, Ant Financial, Paypal, Square, Stripe, Payment Processors, Bank, Asset Managers, etc -- not just the NYSE.
Again, I don't think this will ever happen, ever. But NYSE isn't a great comparison.
I mean, Minecraft was purchased for what 2.5 billion... And that was just 1 game, that had no monetization in it. Coinbase...these fuckers charge an arm and a leg in transaction fees. I believe the hype, that company prints money (and you get to pick your choice)....
I'm doing a little side project with my brokerage account where I pick 20 good socks and 20 bad stocks. Sell the bad ones short and double down on the good ones.
That's how hedge funds work. It's interesting because as long as your picks are mostly right you can make money regardless of of the market is going up or down. Plus it'll be fun to say I started a hedge fund at parties.
For coinbase to ever grow into it's valuation crypto would have to become an integral part of society at large.
After 12 years, it's still largely useless and offers no advantages over centralized financial solutions. The only advantage it had is it is decentralized. But in practice this turned out to be false. So what concrete use case could it have that can't be done better with a traditional database?
My bet is this is a bubble, and it will pop sooner or later. Having some short exposure to that is desirable. Especially if it's not in bitcoin which could rise a lot, but an overvalued company that would take a long time to grow into its valuation.
It will never be under $100 again! Like BTC will never be under $50k again. Well I have no plan about the price of Coinbase, this is more about the value it brings to the crypto market. To the liberation of money, wealth and power to the "normal" people.
It's a revolution and we as IT sector have been sleeping on it (at least it feels like there is a lot of negative feedback concerning this technology).
We are good people, but we refused to follow that hype since 2009 as any RDBM could do the same ... nearly ... on a local scale. Well, not really imho
Now it's there and it wont go away. Tesla, VISA, Master, Coinbase, ... (I'm just from the west and know these, look at Asia, they are the future. They are much further than us)
There will be billions if not trillions pumping into that market. And it will continue, as the industrial revolution in late 19th century. It's a paradigm shift and nothing less!
That is a transparent market. NYSE will no be able to compete with it. Even thought it 100x more old and established. It'll look like a little shop in no time compared to Coinbase, Binance, TFX ....
There have been pseudo "mafia" structures for so long in traditional finance. DeFi and Crypto will show/shows the world how much money can be made handling money. Basically banks have been earning more than all money in the world combined, and they did NOTHING!!!
They just got richer, while generating no value for society. They even harmed the society and we accepted it as we had no option.
Now we can shift that over generating value to the normal person. This is not less "crazy", generating value from basically nothing, but it's the only way to show that the current system is flawed.
Any gov. trying forbid with crypto will fail. It's too late! There is no way of shutting anything like ETH down.
It's technically impossible if there is enough incentive for the mines/staker!
We need a better world! If the cost for doing so is to burn down NYSE (not literally), we should do so today. And not wait another 50 years.
How does Coinbase ever manage to justify a valuation this high? 100B....
Ping me when the stock price is under $100.