Dissecting Coinbase’s Strategy: How It Became The Crypto Industry’s King Midas
In the US, Coinbase is the most well-known exchange for cryptocurrency used by consumers. The organization, which has been in operation since 2012, enables customers to purchase, trade, and store digital assets like bitcoin and ethereum. In a market that was once the sole domain of cryptocurrency aficionados, the firm already enjoys a high level of consumer awareness. After losing its top rank in 2017 in Apple’s App Store, the company’s mobile app made a comeback in May 2021.
With its status as a safe haven among cryptocurrency exchanges, Coinbase has surged in popularity and become the on-ramp for mainstream cryptocurrency investors, despite the app’s brief reign as the top app. Unlike many of its rivals, the firm has never had a hacking incident. In addition, Coinbase has obstinately complied with laws and regulations, keeping it in legal good standing. This is another significant advantage in an industry that is still in dire need of governmental direction. Because of this, Coinbase was able to get about $540 million in equity funding from some of the most prestigious venture capitalists, propelling the business into the unicorn club.
Because of the significant price increases for the assets listed on its exchange, Coinbase has become something of a crypto asset kingmaker for investors. This evolution of crypto assets into an investment instrument is primarily responsible for this development. Increased user numbers may be attributed to Coinbase’s superior security, regulatory compliance, and user-friendliness. Millions of people can trade a crypto asset if Coinbase grants it its “stamp of approval,” which frequently raises prices.
The terms “store of value” and “investment opportunity” are increasingly used to describe bitcoin and other crypto assets, which were before referred to as “means of exchange” and an alternative payment method. Coinbase has redesigned its user interface and message to take advantage of this trend. Previously welcoming customers to “the future of money,” the company’s site now encourages users to “buy and sell digital currency.” As a brokerage, this makes perfect sense: Coinbase is motivated to promote regular trading and investing since it earns money on each deal (depending on volume).
Additionally, Coinbase is working to increase the acceptability of cryptocurrencies as a means of payment. In order to do this, the business introduced Coinbase Card in the EU, UK, and US. You may use the Visa debit card to get cash out of an ATM and make purchases. In June 2021, the business announced that users could now make cryptocurrency payments easier by connecting their Coinbase Card to Apple Pay and Google Pay.
Remarkable user increase confirms Coinbase’s change in message. The firm reported a rise in monthly transactions from 1.5 million to 8.8 million customers on its platform in its second-quarter profits. Coinbase has over $180 billion in crypto assets on its platform, with 68 million verified users. For the quarter that concluded on June 30, 2021, Coinbase brought in over $2 billion in sales and $1.6 billion in net profit.
Even more serious was the Poly Network attack of 2021, when a variety of cryptocurrencies valued at $600 million were taken in what is regarded as the largest cryptocurrency crime to date. These exchanges typically don’t offer the same level of security that conventional investors are accustomed to. The one exception to this is Coinbase. Coinbase holds and insures investments and money; Lloyd’s of London insures the remaining crypto assets, which are primarily kept offline in cold storage vaults. Money kept in USD wallets on Coinbase is protected up to $250,000 by the FDIC.
Customers are still in charge of safeguarding their own login credentials and passwords. Coinbase will not reimburse lost money to a customer whose login credentials are hacked. To combat would-be hackers, Coinbase advises users to enable two-factor authentication and store their money in cold storage.
Coinbase is fighting against more competition from both new and established decentralized exchanges. The business is also having trouble operating at scale, as shown by the support staff’s hurried response to a backlog of inquiries concerning, among other things, exchange outages and delayed money transfers. Finally, because Coinbase directly affects the price of crypto assets, it needs to be on guard in the event that the market experiences a prolonged downward trend.
Tags: Insights