Argument in investing in Coinbase has seemingly decreased over time. Few users actually care about owning bitcoin in a true bitcoin wallet. Other apps such as Robinhood, and Cash app have easier UI. It's unclear where Coinbase will get long term growth.
Coinbase should be viewed as a wealth & asset management company at this point. The real profit center of the company is Coinbase Custody, which is all about extremely secure holding of Bitcoins for extremely rich customers. The retail arm of Coinbase is more for free advertising - I think they make money off of it, but not huge amounts. It's much like how Dropbox is really an enterprise backup company where consumer Dropbox gets their foot in the door, GitHub is an enterprise code hosting company where open-source GitHub makes developers familiar with it, and Google is an enterprise advertising company where consumer Google gives them somewhere to advertise on. For that matter, Robinhood is an enterprise data company for hedge funds that sells information about what retail traders are about to buy.
There's a fair bit of money in WaAM - my wife used to do it for Wells and had a $6B book (as a fresh college graduate!). Consumers don't have money, that's what makes them consumers. If you're managing money, you ought to do it for rich people that have a lot of it.
>Coinbase should be viewed as a wealth & asset management company at this point. The real profit center of the company is Coinbase Custody, which is all about extremely secure holding of Bitcoins for extremely rich customers.
If this is actually the case, I'd much rather use Gemini than Coinbase. Gemini seems much more fiduciary-minded in their verbiage on their site, and the fact they don't throw a bunch of "shitcoins" at your face on every other click. Their fees are lower, too (but higher than Coinbase Pro, which is more for the trading-minded) and they have a daily auctioning system which to my knowledge coinbase has no equivalent.
Also, Coinbase is notorious for the servers crashing on every price spike. Gemini, on the other hand, stays out of the headlines regarding uptime, which is what a wealth management company should do.
Full disclaimer: I have accounts I use in both Gemini and Coinbase, I don't believe myself to be biased here, and I actively use both services.
But if you really want a "wealth and asset management" service, I would personally recommend Gemini as the platform. If you think you have a leg up on the market and would like to trade for profit, go with Coinbase.
Do you have $100M to invest? The rules are completely different for institutional investors and high-net-worth individuals. Generally if you're looking at "the verbiage on their site" you are not the target market for such services, and the products available to you are completely different from the products available to them. My wife's job is all conducted over the phone; when I was working for a company that sold software to hedge funds, our website was blank (and just gave a phone number to call).
I'm not entirely sure if I understand what you're saying completely, but if I do, then that's even _more_ to my point I made.
If I have $100M to invest, why the hell would I go on Coinbase like a common day trader millenial looking to make $2500, rather than use Gemini Trust to store my millions, where I could save hundreds of thousands or millions of dollars using their auction system?
To loosely use an analogy if you will, Robinhood is to Coinbase as Vanguard is to Gemini.
Institutions and professionals don't seem to agree. For example, Microstrategy chose Coinbase to acquire over 40,000 BTC recently. [0] Maybe there are some aspects you're not considering. Seems difficult to believe you know how to spend their money better than they do.
I think nostrademons was trying to make the point that Coinbase Custody has nothing to do with Coinbase. Even if Coinbase looks amateur, maybe Coinbase Custody and Gemini Custody are both equally professional.
Yes. Also, interestingly products made for the ultra wealthy are less professional than those for a consumer marketplace. I don't know any consumer website that could get away with a webpage that just says "Contact us for more information. 555-555-5555." But this is pretty common for products that target hedge funds and family offices. The real professionalism happens in the grooming that happens after that initial call, which is all person-to-person relationships.
If you want to trade, use a derivatives powerhouse like binance. Trading crypto spot is mostly just a waste of time. Until Coinbase and Gemini add futures and swaps, no trading firm or individual is going to trade with them. Full stop.
Volume is much lower, the amount of leverage you can get is lower (I don't believe you can get any leverage actually on coimbase), and the kinds of strategies you can run are limited.
Futures and swaps just give you so many more contracts to arb and more leverage if you want it.
Not entirely sure how you got that from my post comparing Coinbase to Gemini while responding to a parent comment talking about wealth management, but OK. I'm not the one claiming there are any sort of worthwhile margins in crypto storage.
> Coinbase should be viewed as a wealth & asset management company at this point. The real profit center of the company is Coinbase Custody, which is all about extremely secure holding of Bitcoins for extremely rich customers. The retail arm of Coinbase is more for free advertising - I think they make money off of it, but not huge amounts.
As a casual observer, I believe you are dead wrong here. My guess is that the retail arm of Coinbase is the real profit center. Will be interesting to find out.
I would say Coinbase is making money hand-over-fist with retail. The basis points they charge are enormous compared to stock exchanges. Crypto is low-volume compared to traditional equity markets but very high-fee.
My understanding is that retail is moving to DEXes. Uniswap just passed Coinbase in total trading volume. Retail investors are quite reasonably getting tired of getting screwed and opting out entirely.
True retail is mostly on CEX's. Folks on DEX's are mainly power users.
Also there are two reasons why DEX's have high volume:
- Long tail of assets are only on DEX's. Average retail isn't buying these
- DEFI protocols utilize DEXs. I would argue most of the volume isn't people trading, rather automatic trading to support protocols like Yearn.finance
Of course they are. Let's assume they are making 0.20% per trade (you can lookup their fee tiers online) - at current volumes that's around $5mio a day in fees. I doubt coinbase even needs the money - the IPO market is just really hot for blockchain related companies at the moment and it would be foolish not to raise some funds.
> The real profit center of the company is Coinbase Custody
Citation needed. The fees are significantly lower than the brokerage (custody fees go down with larger amounts), which has been the bread & butter that's funded the development of all their other operations. Custody fees are probably not insignificant in absolute terms, but I'm highly doubtful they're greater than brokerage fees.
Coinbase actually owns Xapo's custody business, they bought it in August 2019 [0].
An amount like $5b would likely pay less than 10 bips (0.1%) per year in custody fees, or $5m/year. Coinbase Pro's volume has recently been doing up to a few million dollars in revenue per day - and that's not even counting the higher brokerage fees that apply on top of some of that volume.
Custody is certainly an important part of the business. But I think brokerage currently accounts for a much larger % of revenue. Custody will become bigger as the price of crypto grows.
Good back of the envelope math. 0.1% of 15% of circulation is around 60 million. Big but not as big as trading.
I'm sure there's some vertical integration considerations here: the people that hold this amount of assets also trade, and probably trade at OTC with very special requirements that make them valuable.
They should be viewed as a story company. They sell the story of being the first and therefore the biggest public company adjacent to something something crypto. They could literally hand out Bitcoin at a humongous loss, and as long as that is spun in a good deck, their IPO will still be enormously successful for the insiders and institutional buyers at the bank price.
If you're looking for wealth & asset management, wouldn't you want a more general purpose enterprise like Wells Fargo? If you're wealthy enough to need that sort of management, you're probably going to want a decent level of diversification, which Wells & others can provide, but Coinbase does not.
Although I suppose Coinbase could be the platform through which those general purpose companies work for clients that want crypto.
Coinbase is really, really good at security, in a way that Wells Fargo is absolutely not. I interviewed there recently and some of the technical details about how they store keys etc. boggled my mind. I ended up going back to Google instead, but it was easily Google-level security.
And yes, the potential market for Coinbase Custody is companies like Wells, Goldman, family offices, etc. that manage money for the actual rich people. On the application form they ask you how many millions (or billions) you have under management. They're clearly marketing it to hedge funds, WaAM divisions, family offices, etc that are managing institutional money.
Wells Fargo's fraud issues have been on their retail branch side. Of course that's should be a warning sign for other parts of their operations too. There's plenty of other options though. As for trusting them, I'm pretty sure they're on the hook for the $$ they owe you even if their wallet gets stolen. If someone hacked their brokerage accounts and stole your 1000 shares of Apple, they'd still owe you 1000 shares.
Of course this could also be where Coinbase's niche ends up: providing the backend infrastructure for traditional wealth management companies to handle the crypto plumbing for them. If I were Wells Fargo or similar and wanted to offer crypto services to my wealth management customers, I'd much prefer using Coinbase as a turn-key solution for it than try to roll my own setup. Or simply buy Coinbase itself and have a huge strategic advantage over competitors.
Of if I were in a position to make such decisions, I'd be too busy swimming through my piles of money, lighting cigars with $100 bills, and sipping single malts older than my great grandfather to bother posting here from my armchair where I have not a single horse in the game.
You can't steal shares the way you can cryptocurrency, it's an entirely different thing.
A brokerage might be the "custodian" of your shares, but you still have control over them, and there's a massive paper trail to prove that. Borderline impossible to steal.
Crypto being easier to steal wouldn't really change the legal obligations of a wealth management firm acting as its custodian. There can be a massive paper trail, and blockchain trail, to prove that too. I'm not sure I really see a distinction here. It's also not impossible to steal, wealth managers do it from time to time, it's embezzlement, and the banks make the person whole. It happened to my grandfather: His manager at the bank converted assets to money and took the money. They got caught, and my grandfather got his money back.
Sure, but if the theft is large enough the bank may not be able to cover it, I guess depending on the terms of their insurance. Easier to steal, to me, means higher chance of insolvency.
Imagine if a bank had a billion dollars of BTC that got stolen while prices were rising, and they had to rebuy on market to cover their liabilities. If that happened, and the public became aware, prices would shoot up as everyone tries to frontrun the bank. Wouldn't be surprising if the bank had to spend 2x+ to cover.
Coinbase is the leading US regulated crypto currency exchange. There are bigger ones outside of the US but if you want to actually buy cryptos and your are a US based investor chances are you will have to stick with them. I think they will do just fine.
Except if you go for decentralized exchanges, that sidesteps regulation and KYC/AML entirely. If countries keep fragmenting their crypto regulations, then so will liquidity. The decentralized exchanges will be the only venues left that pool liquidity at a global scale.
You still need a centralized exchange to be an on-ramp to go from regular money to the blockchain. But that's way less lucrative. You convert your dollars to USDT/WBTC/Ethereum at Coinbase, transfer to your wallet, then do 99% of trading/gambling on Uniswap. That's not a future where Coinbase is very valuable.
If countries keep fragmenting their crypto regulations, then so will liquidity.
Not necessarily. The regulatory landscape in traditional finance is somewhat fragmented as well, which simply means people/institutions/corporations shop around for the regulatory venue they prefer.
Or the US can impose its own de-facto global regulations, similar to what it already does on a global scale because a huge % of finance goes through US banks at some point. For example: Want to go against the Iran sanctions? Well, you can, legally, if your country hasn't signed on to them. You just won't ever be able to do business that touches anything US related. Which means you won't be able to do business with any other major western or global bank either under threat of the US cutting ties with them.
Without large institutions, and a few of the largest playing the part of "market makers" that provide liquidity, you won't get significant liquidity for large moves, not unlike the current crypto situation. And large institutions will always be subject to the sort of regulatory situations above.
It's a bit of a paradox: Part of crypto's appeal is its freedom from regulation. But in order for crypto to really go mainstream, global financial systems & their regulations. Nations have a strong interest in keeping monetary policy within their control. They will use every tool at their disposal to make sure crypto can't do an end-run around that control.
> You convert your dollars to USDT/WBTC/Ethereum at Coinbase, transfer to your wallet, then do 99% of trading/gambling on Uniswap. That's not a future where Coinbase is very valuable.
But then Coinbase would just charge high fees for doing so and draw those down over time if/when competitors enter the market.
Most "regular people" are going to use trusted and established brands and companies. They don't want to see their money go poof.
Decentralized exchanges still have lots of issues that would prevent a serious investor from using it. And sidestepping KYC/AML regulations is not an option for any institutional investor.
Binance.us, Kraken, Gemini, cash app, crypto.com, etc... there are many many ways for people in USA to buy & sell cryptocurrency. Most of them are more reliable than coinbase. Coinbase's main advantage is just being earlier to the game than most, and many of their users will continue using them because they don't yet have a reason to put in the effort to switch.
Coinbase, and to some degree, Binance, have such a stranglehold on the market that any coin listing on these exchanges immediately causes them to rise anywhere from 100-500%.
New projects will even tease "Binance listing coming!" to build up hype for their projects.
And Binance is still not as selective as Coinbase. A Coinbase listing is a marker of legitimacy for any crypto project.
This reputation alone makes Coinbase a very valuable buy.
Buying bitcoin with PayPal isn't equivalent with buying from Coinbase or other exchanges/brokers. You can't send your bitcoin outside of PayPal. You cannot withdraw to your own wallet/cold storage.
Not equivalent, sure. PayPal's crypto appears to be aimed at the less-technical users who want crypto exposure. There's surely a market for that. Perhaps they can play the Windows to Coinbase's Linux.
> You cannot withdraw to your own wallet/cold storage.
The prevailing mass interest in Bitcoin is for speculation, which doesn't require an offline wallet. Letting PayPal hold it is fine for most users.
It sounds like PayPal isn't actually buying Bitcoin, but instead created their own proxy bookkeeping instrument. Speculation, but that's what it sounds like to me if you can't have Bitcoin's utility and only its store/speculation.
That sounds extremely risky for PayPal. They're effectively shorting bitcoin by doing that. If the price rises dramatically they have to just come up with that money out of their own coffers. If they buy bitcoin they can merely liquidate it and pay you the proceeds when you sell your paypalcoins.
There isn't a winner take all strategy in brokerage houses, its take enough to make a return, why would you apply a different higher fictional standard to crypto exchangers?
Also they provide various interest-like services and keep the difference between what they earn and what you earn.
Staking is lucrative for customers and is non-trivial to setup. Robinhood and Cash don't offer these services. I guess an argument that can be made is that Coinbase understands the technology and will continue to offer products from the innovative defi/blockchain space. Most people will use Coinbase for its product offerings and security. It sits right between, Robinhood and Uniswap. If defi truly disrupts then I'm sure all financial institutions will start offering staking and defi products, then Coinbase hopefully has some first mover advantage.
Coinbase by itself is horrible, always buggy, goes down when you need it most.
Coinbase and most exchanges will most likely get replaced by a freemium exchange one day.
Coinbase has two things that are a solid moat, most important is network effects which lead to liquidity, second is trust in custody. There are literally hundreds of cheaper and well run alternatives that can't get any traction due to deficits in the former (chicken egg liquidity problem) or latter (brand, reputation).
>It's unclear where Coinbase will get long term growth.
By being the easiest cryptocurrency broker to use, by far. By being based in the US, and not in some SEA country (not saying that's inherently bad, but I'd rather keep my money in the US if at all possible). They even have an insurance policy for everything on their platform. Let's see the Binances of the world provide that.
The latter is largely due to regulatory capture, US customers being banned from Asian exchanges due to US regulations. Almost nobody outside the US actually prefers Coinbase, the fees and liquidity is just much worse. The volumes on Binance speak for itself.
They’re definitely one of the easiest if you actually want to do accounting and tax reporting properly. Decentralized exchanges don’t make it easy to get transactions off of and non-US exchanges have to be reported as foreign bank accounts.
I’ve heard some aggressive interpretations that your personal Bitcoin wallet could be reportable as a foreign asset by saying that Bitcoin is in the cloud, not anyone country.
Saying your keys are in the USA is kinda like saying your Swiss bank account’s login and password are in the USA. If that Swiss bank account is still reportable, why not your Bitcoin too?
What matters is where the asset is, not where you can control it from.
Even in the stock market the big institutions all use a prime broker for trading access and the sales and trading desks of IBs, and they all use bank run dark pools for liquidity.
I think most in crypto are and if not ought be of the mindset that if you yourself do not possess the coins keys you do not own them and are therefore disinterested in robin-hood cash app etc.
You need to be careful with this message. A lot of people are not capable of responsibly managing their own keys. There are countless stories of fresh faces taking this message to heart and then finding they've lost their stash a year later.
You do gain a higher degree of financial sovereignty by managing your own keys, and it's definitely an important option to have and fight for. Just be cognizant that you also gain a lot of responsibility, too. For some people, storing at a site like Coinbase will continue to be a safer option.
Who's to say their exchange account doesn't get hacked? SIM Swapped, etc. But yes I do agree storing your own coins would be a nightmare for people who are not savvy with computers and shit. But I do think that in theory paper wallet is easy to secure with 0 tech knowhow (though ofc the tricky part is generating one securely), just put it in a safety deposit box.
All that being said it still seems really pointless to me to have coins which you cannot send online. But prehaps if like my grandpa wanted to hold some bitcoin as an investment, I'd advise something like cash app robinhood because no matter what you do wrong nobody can get the actual coins, at best to a fraudster it's another classical bank account for which there are all manner of legal clawback methods and safeguards in place.
People that get into crypto and go to an exchange like coinbase, should already understand how it works and they are getting themselfes into.
These people that are just buying to invest and don't understand how to make a wallet, will most likely be the same that make horrible decisions, investing wise.
Crypto must be used as it was intended for.
It's not that hard nowadays, actually pretty simple.
The intention of crypto was to provide the option to opt-out of traditional finance, not to mandate that you opt-out.
Even you yourself don't understand it, so you you should be a little less confident in what you promote. Equating investment ability with key management ability is stupid.
If you think that, than coinbase is DEFINITLY not for you.
Better buy crypto on paypal or some other garbage that doesn't allow you to fuck up with you bitcoin.
I don't think they is true for "most in crypto[currencies]".
The vast majority of people involved in the space today are simply here for the money, and would prefer cryptocurrencies to work more like their existing bank accounts.
Wild-ass guess: "most" is true of "number of humans that own cypto-currency", but probably not true of "percentage of crypto-currency by value held", if that makes sense. More succinctly, I'd expect more crypto to be held in exchanges than in individual wallets, if you're able to somehow account for coins/value stored in lost wallets.
Update: looks like figuring this with any real accuracy is probably near impossible
I would say that it depends on the sophistication of the user.
I work for a crypto company and this is our belief. Users hold their own keys and must sign their own transactions. Of course that means that things like limit orders can't be done (easily) and it means all trades have more latency and more costs (due to fees for sending transactions vs. db entry).
However, we've found it difficult to get market traction as a lot of people seem to prefer the ease of custodial wallets.
Interestingly, if true (it is) this makes Bitcoin (BTC) itself inaccesable to the majority of the world. My favorite BTC stat is that if just 1/2 the world wanted to make 1 transaction it would take the BTC network 50 years.
This is by design. The BTC GitHub repo was hijaked years ago by Blockstream and corporate interests that want to force users on to their "second layer" solutions.
Real Bitcoin users and anyone with a brain moved to competing projects like Bitcoin Cash, Ethereum and Monero long ago. Only newbies and shills stick around pushing the, biTcOiN is gOLd narrative.
I bet their revenue distribution is pareto with most of it coming from whales/institutions. This is where the current growth + long term growth is and will come from.
