Coinbase to go public on 4/14
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Does this mean that if you are, say, a New York based Robinhood customer, and you buy Bitcoin, then the only thing you can do with them is sell them later?
You can't even sell your coins at another exchange if the price is better there.
With Robinhood and the like, you're only speculating on the value of the coin, which is very unhealthy for the market the as more of these 'exchanges' become common.
(Now please do better at customer service <3)`
Yeah congratulations to the Coinbase founders, employees, VCs, investors and institutions who have a stake in Coinbase. They are the real winners in this IPO.
The losers will be the foolish late retail investor who buys on IPO day. (Since it will dump due to the institutions selling off) and the past employees who walked out due to Coinbase's stance during the woke revolt of 2020.
Surely they will now tell you that it was all worth it. /s For them, they can now buy it again for >$200 a share on IPO day with a smile on their face like the rest of us. :)
Downvoters: So you want to buy Coinbase stock at over $200 a share on IPO day and be holding the bag when it drops when the founders, investors and employees start selling 10% of their shares? Sounds like a FOMO investor mindset to have.
As expected.
> Downvoters: So you want to buy Coinbase stock at over $200 a share on IPO day and be holding the bag when it drops when the founders, investors and employees start selling 10% of their shares? Sounds like a FOMO investor mindset to have.
As expected. Typical pump and dump activity and another set of FOMO bag holders sitting at the $424 a share mark.
This is not financial advice.
Either way it’s a very specific bet. Diversification is your friend.
This is by no means a GREAT way to do it, just the best option currently if you are looking at crypto from a US based brokerage account.
So this is basically 100% speculation, because you can't even use the crypto you "purchase"? You're just hoping for prices to go up. How does that make sense for a purported currency? If people aren't using it, what is the value?
If you believe in crypto, why would you invest in a centralized exchange? Seems antithetical to the principles of cryptocurrencies.
For me the most important aspect of decentralized assets is separation between money and state; challenging government monopoly power over money.
That said, there are conveniences and advantages to centralization. Centralized exchanges help supply and demand meet quickly and efficiently.
I think its possible for those systems to live together productively. There is freedom when I choose to trust and consent to other willing parties to take control of my assets. The problem arises when we are compelled to give up control by force of law.
Normies will be buying their bitcoin on cash app, paypal, etc. In this way I feel CoinBase is a niche product with limited growth capabilities long term. The more CoinBase makes, the more the big names in tech/finance will expand their efforts to compete. CoinBase is a decent short to medium term play imo, whereas bitcoin itself is a longer term play.
Otherwise what you (and many others, but not all) believe in as an investor is the possibility of a return from storing your dollars in bitcoin and retrieving the value later.
If you think this announcement would affect the price, look at price history data for the time of the announcement up to the date of going public. That could serve as some kind of signal given some model assumptions. Avoid confirming your own biases and establish your margin of risk as damage tolerance.
As I see it, betting on coinbase is betting on the volume of transactions increasing over time.
The situation here is unique because all of the popular coins have fixed supplies so any increase of popularity will have the commensurate increase in price. I don't see any situation in which Coinbase grows in price faster than the underlying.
Also, anyone who holds index funds and no cryptocurrency, that strategy essentially ends up in them holding some Coinbase but no Bitcoin.
For the sake of discussion let's say you can either own some amount of Coinbase or a weighted average of the top 5 coins offered on Coinbase itself.
In my view any instrument or tool that leverages a coin with a fixed supply means more popularity which means higher price for the coin. In the end Coinbase absorbs much of the benefit as it has expenses. I don't see any scenario in which Coinbase is more successful than a basket of the underlying.
Now if coins were inflationary I could understand, but they're not. Seems dumb to buy Coinbase IMHO.
A basket of the top coins also includes garbage like ADA and XRP. Crypto is not the place to market weight IMO given the frequent disconnect between price and quality of projects.
Also diversification is a good thing.
If you buy a specific cryptocurrency and that particular one is hacked or whatever, you lose. But Coinbase won't be sunk by any one cryptocurrency failing. It will be approximately as successful as the most successful cryptocurrency regardless of which one it is, because they all eventually need some kind of connection to the banking system and the US dollar.
Here the situation is different: in the gold rush gold circulation went up, and gold was devalued, so mining that was even worse business than mining Bitcoin.
The problem with Coinbase is the Coinbase vs Coinbase Pro distinction and the huge margins for the Coinbase product that I expect to go down when people realize it.
Mature coins no longer go up in value in double digits multipliers but their trade volume is bigger than ever because of the increased interest and online markets, be it the ones on (dark.fail) or Tesla.
Your other choice to benefit from the increase in the trade volume is to setup your own rig and join a mining pool, but that's more involved than what most people are willing to do.
Without the dark web markets since The Silk Road in 2011, and now Tesla and big legal companies, coins would have no real purpose to exist. The hype alone isn't enough to keep them all this time and dark web markets aren't quick into adapting new coins each time. Many have ditched BitCoin to Monero only because of the privacy factor, not growth.
Big amount of BTC trades happen in exchange for goods and services and often time switching coins isn't an option there.
1.14 billion revenue 2020, $322 million net income.
A thesis of the risk of their profit being tied to crypto prices is that big retail trading volume relies on rising prices or at least rising sentiment/popularity.
On the other hand, can argue probably not super important (unless they have huge settlement risk). Falling price = sell orders (and someone buying on the other side of transaction). Unless everything goes to zero, which seems like a low probability barring extreme world-wide government regs.
https://www.cnbc.com/2021/02/25/coinbase-files-for-direct-li...
Also, Coinbase might come up with additional income sources in the future.
My one worry-- it seems like they use a similar pattern to Robinhood where upon purchase they grant an asset immediately (synthetically?), and then settle up actual holdings after the fact. What kind of risk does that open them up to in an asset class as volatile as crypto?
In the MTGox days, the discrepancy could be viewed in the delay to take out one's coins; as well as in their market, which was displaying a very different prices than on other exchanges. Scary stuff I'm sure some HNers here will remember.
A delay to take out coins != a fractional reserve. Exchanges operate with hot wallets that have limited throughput, there's a ton of reasons that particular withdrawals may be delayed that don't have anything do with having those assets.
One of the more common scenarios you would see is the hot wallet running low of funds, and there's a delay before more funds can be sent from cold storage to the hot wallet to service more transactions.
If more people are taking crypto off of Coinbase than sending it in, the hot wallet trends downwards. If whales make large withdrawals, it can take a huge leap downwards. Funny antecdote, whales see significantly more delays than your typical consumer but are used to it and have some lines of communication to get insight if they have concerns.
The process to move funds from cold to hot starts, but it's intentionally slow and takes time. So sometimes withdrawals can be delayed until that process completes.
Well, this isn't difficult to prove. Do they have a public process to display that 1:1 backing?
Google is failing me, I can't find anything but this:
https://blog.coinbase.com/a-behind-the-scenes-look-at-the-bi...
Coinbase, and various other exchanges are regulated in the US so they undergo regular audits where having to prove funds is part of it. Some exchanges, I think it was Kraken, has published some version of those results, but the problem with these is at that point you're saying you trust the auditor and the process, which is another thing people would complain about anyways.
Technically, it's also very nontrivial to prove ownership of millions of addresses when they are also constantly changing (due to new address generation). Proving ownership of addresses stored in cold storage is even more involved, and would actually put the funds at risk because you would need to us bring the key out of cold storage to do so. Furthermore, people would likely not be satisfied with a one-time proof, so you need to operationalize this and do it on some regular basis.
Lastly, while this would be nice to have, it's frankly not something I expect any major exchange to do because it's simply not worth the investment. Most customers don't care and are happy to trust the government and regulations to ensure they are good enough. While I understand people are concerned because of what happened with MtGox, that doesn't mean that every other company after is involved in some big conspiracy about lying how much crypto they have. It's just FUD/conspiratorial thinking without real evidence to back it up.
The exchange going down at key moments (read: when the app is seeing peak traffic at new milestones regularly) is basically expected for a young fast growing SV startup, and doesn't support the argument that they are nefarious things going on
We recently know that Coinbase has had bad behaviour of manipulating the price and find a measly $6 million for market manipulation, so it seems not outside their character.
> After not paying attention to cryptocurrency for a few years and then opening a Coinbase account earlier this year, I was SHOCKED how fast and easy everything was.
I read this as having just created the account and impressed by the platform, not a comparison between the past and now shrug
They've definitely done tons of work to try and address scaling problems, have solved many and will continue to do so, but it's not like you just "solve" scaling once and never have to think about it again. The scale they are seeing now is nothing like they saw in previous runs, so it's always new milestones, something new breaks and then something else to fix.
There's also been a lack of a clear vision from engineering leadership at the top for many years which hasn't helped either.
> We recently know that Coinbase has had bad behavior of manipulating the price and find a measly $6 million for market manipulation, so it seems not outside their character.
My understanding of this is that a couple of internal systems accidentally interacted in a way that was later deemed bad, not an intentional manipulation. And when the COO noticed this action was taken to replace the system with a version that fixed this issue [0]. This was in 2015-2018 when they company was significantly smaller with less expertise on that front. If this had had a significant impact on consumers I would expect to see a larger fine, but I'm not at all well informed on the topic.
Having worked at various startups, the old adage of "don't ascribe malice to what can be explained by incompetence" resonates with me. You so regularly see wild speculation happening on the outside when inside you're just like "wtf that was just a bug, not some grand conspiracy". I expect that this issue falls under that category, lack of knowledge rather than part of their "character"
[0] https://decrypt.co/62155/coinbase-fined-6-5-million-over-tra...
If you have a link to a writeup provided by the SEC's investigation outlying this as an accident - I'd like to see that.
Plausible deniability is used by bad actors, and the existence of investors investing in founders who will do anything to protect their investment isn't a myth - it gets discussed a few times per year in threads on HN and Reddit.
Two independent programs with separate purposes, sometimes accidentally trading with each other which could affect the price. This information was included in API data (since it was just normal trades) which can create the appearance of activity or volume that doesn't truly exist. But these were real trades, so in some ways it does still exist it's just that CB happens to be on both sides.
[0]: https://www.cftc.gov/PressRoom/PressReleases/8369-21
> Plausible deniability is used by bad actors, and the existence of investors investing in founders who will do anything to protect their investment isn't a myth - it gets discussed a few times per year in threads on HN and Reddit.
I agree that has been used like this and will be in the future, but it's different to claim it's possible than spread FUD that it is actually happening (not directed at you to be clear). The latter is what you commonly see in online discussions revolving around Coinbase, though really with all tech companies.
To make up for this, the risk & fraud team at Coinbase does incredible work to have very low fraud rates compared to other tech companies and has specific product features to help mitigate this too.
For example, one of those is that when you buy with certain types of payment methods, you can't actually remove the asset from the platform until after some computed period of time. That value is based on a variety of factors powered by some fancy ML stuff and other things to help reduce the risk of loss. Actually recently an ex-Coinbase employee founded a new startup offering fraud-prevention as a service (https://www.sardine.ai/).
In short, Coinbase is very good at reducing fraud on the platform and invests a lot in improving that.
Crypto is here to stay. There's plenty of exciting projects like filecoin for decentralized storage, cardano for 3rd gen smart contracts, and more exciting projects that are coming online.
I hate when people treat cryptocurrencies and stocks as just something you buy and sell.
There's actually a vast amount of people and effort underneath blockchain projects that are trying to solve very hard problems. Just as stocks are an actual part of a company where people work hard to solve problems and create value in the economy.