Can't that model be expanded to include any tradable commodity? Why can't I get a 'Gold debit card' or a 'Nasdaq Debit card'?
Would there be a market for this?
Brokerages love this product, because being a debit issuer is a great business to be in. From an optimizing-your-personal-finances perspective, most HNers should probably get a rewards card from their bank of choice; you can trivially arrange the credit card to pull from a bank account and your brokerage to push to the bank account, in the case where one's spending is materially backed by one's investment portfolio (which feels like not something people should make a habit of in most cases).
Is there a particular tax advantage that I'm not considering? I'd love to know as this sort of stuff is like crack to me.
It's also the cheapest possible credit you can obtain as a consumer. TBH it's so cheap that you can reasonably expect your investment returns to at least match it in the long run, so as long as you aren't drawing so heavily as to get an unhealthy leverage ratio
Not saying there might not be some way to make it work, but it probably involves a lot of unnecessary risk and high transaction costs.
Seems like it's just too much headache without any of the purported benefits that bitcoin has over traditional money.
Gold is hard to sell in tiny fractions as well.
Presumably this would work the same way Coinbase will choose whether to sell some of your bitcoin or some of your ethereum (i.e. you choose)
I’d assume they don’t see a market, more than they don’t see a practical way to make it work.
The provider could either eat the change in price over the day, or pass it back to the user by first presenting an estimated amount and then a final amount when the transaction is completed when the market next opens.
n.b. Not true; a lot of retail brokerages are happy to deal in fractional shares. A common use case is implementing dividend reinvestment, where you might have the 10 shares you own issue a dividend entitling you to .005 shares; many retail brokerages can trivially support this.
The "How?" is potentially interesting: over the entirety of a broker's book of business, there are a lot of holders of e.g. SPY, so the broker (or their internalizer) just buys (pick a number) 713 shares, assigns fractions correctly, and keeps a tiny bit of the last share on their own account. This comes out in the wash, because retail customers are extremely lucrative to service at scale, and having to be ~$100k long various publicly traded equities to keep the tollbooth running is cheap at the price.
But also, Coinbase owns an exchange, so they don't have to commit every transaction to the blockchain, so it's peanuts for them.
That's still significant for small transactions. Beyond that, will it scale well enough to cost only 10 cents if it becomes the new Visa/Mastercard? The transaction rate of BTC/ETH is still almost negligible when compared to mainstream payment processors.
>Coinbase owns an exchange, so they don't have to commit every transaction to the blockchain, so it's peanuts for them.
My point exactly. It's not a Bitcoin card, it's a Coinbase card, the cryptocurrency aspect is tangential. This is not cryptocurrency going mainstream, it's the mainstream taking over cryptocurrency because it's just so much more convenient to have a Visa card than a Bitcoin or Eth wallet.
Visa is more convenient today but it took decades for Visa to get to the scale and scope and convenience it has today. If people start parking more money in crypto and using crypto credit cards it's only a matter of time before merchants start accepting direct payment from coinbase wallets. At that point, Coinbase can bypass Visa and charge a fraction of the fee for facilitating the trade from USD to BTC.
Obviously there could be some sane defaults. By default aggregate all card spending against user's margin account, every day/week/month sell the cheapest stock which covers outstanding balance (so if you spent $150, it would first sell 1 share of Apple, it wouldn't start selling Amazon until you run out of Apple shares).
Of course when both parties are clients of Coinbase or Goldmoney respectively then the ownership of the bitcoins/gold can be directly transferred.
20 years ago I could write a check against my Vanguard mutual funds and I'm pretty sure they weren't the only brokerage that offered it.