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>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.

[0] https://blog.coinbase.com/coinbase-is-helping-corporate-comp...

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.

Rentec being one of the most successful hedge funds come to mind. Here is their site and investor login https://www.rentec.com/Home.action?index=true

You’re grossly over estimating the margins in Crypto custody.

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.

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.

Could you elaborate for those with less financial markets experience? Why trading spot is a waste of time?

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.

BTW, Gemini has different fee structure on ActiveTrader accounts vs regular accounts.

> 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.

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.

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

> 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.

A single customer could have 5 billion dollars of bitcoin. Xapo, a competing company in that space, holds 15% of all bitcoins in circulation!

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.

[0] https://www.coindesk.com/crypto-exchange-coinbase-acquires-x...

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.

I don't trust Wells Fargo to handle cryptocurrency securely. Don't they have rampant internal fraud problems already?

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 is a different story.

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 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.