Coinbase CFO’s View of the Future of Cryptocurrency

Employees work in the Coinbase Inc. office. in San Francisco, California.

Michael Short | Bloomberg | Getty Images

Cryptocurrencies including Bitcoin It hits all-time highs, but Wall Street sends shares of the cryptocurrency leader Queen Piece Lower after Tuesday’s earnings and weak crypto-trading quarter.

Coinbase mentioned Users transacting monthly have decreased From the previous period, it fell to 7.4 million from 8.8 million in the second quarter, although up from 6.1 million a year earlier. Trading volume fell to $327 billion from $462 billion in the previous quarter and disappointed the street with quarterly revenue.

Losses narrowed after Tuesday after the sharp decline of 13% and some Wall Street remains optimistic According to the company’s forecast with price targets of $500 – its shares were trading at less than $350 on Wednesday.

“We don’t think the sequential decline in revenue should have been surprising,” BTIG equity analyst Mark Palmer told CNBC on Wednesday. This quarter is expected to be Coinbase’s largest ever after trading slowed down over the summer.

in a shareholder letter, the company noted that its business was volatile, and tried to make the case that it should not be thought of as a “quarter-to-quarter investment”.

A survey conducted among CNBC CFO members earlier this year found Greater Bitcoin Acceptance As a financial instrument, more than half said it was “real,” although senior financial officials expressed concerns about pegging a reasonable value to the cryptocurrency. Among US financial managers, specifically, the percentage that says bitcoin is real doubled from 33% to 65% in the March survey.

Alicia Haas, Coinbase’s chief financial officer, laid out several key strategies for the $70 billion company during its earnings call and in response to questions from equity analysts.

Cryptocurrency trading fees are not a business model

While Cryptocurrency Volumes Have Declined – That Was A Factor In Q3 As Well Brokerage firm Robinhood criticized – Haas emphasized that the company does not consider itself a business.

“We don’t think we’re primarily competing on fees today,” Haas told analysts.

This is because trade is by nature a commodity business.

Coinbase’s chief financial officer said that on the retail side of the cryptocurrency market, the company is competing “for access to the assets.”

future use maskDealing with products like its Visa Debit Coinbase card, the ability to interact with DeFi, or decentralized finance will be more branding for the company, not one quarter trading volume or revenue.

“Fees are not the primary aspect we are competing on,” Haas said.

She added that fees will be compressed in the future.

Alicia Haas, chief financial officer of Coinbase, listens during the Milken Institute’s global conference on October 18, 2021 in Beverly Hills, California.

Patrick T. Fallon | AFP | Getty Images

In periods of low volatility, which occurred during the summer, there was more activity among institutions and Coinbase Pro users than in retail, and vice versa for periods of high volatility, which occurred again in September and October.

“We believe in the long-term, despite minimizing a little bit, we will see fee pressure as more and more products will be commoditized in cryptocurrencies,” Haas said. “So, we’re really starting to focus on diversifying our revenue.”

Coinbase is betting that as the cryptocurrency enters what the CFO has called a “benefit phase,” users will not come to its platform just to make transactions and buy and sell cryptocurrencies.

Of his efforts to diversify revenue sources and reduce revenue volatility quarter to quarter, Haas said:

However, at a valuation of $70 billion, investors may continue to worry that competition in those additional markets will also be high.

Coinbase also contains files He faced a setback from the regulators on a pre-planned loan programme.

Institutional Investor Adoption Curve Exceeding Bitcoin

Coinbase’s chief financial officer said there is a “new type of institutional investor” deciding to allocate cryptocurrency and that is the adoption curve that “starts with bitcoin, then typically moves to… raised But soon it will move to other crypto assets.”

Haas says the company sees these investors looking for a broader allocation of DeFi and betting in the broader crypto sector as an alternative to traditional financial systems.

“It feels less speculative and is more driven by the interest and broader adoption of cryptocurrencies in more traditional use cases,” Haas said.

Crypto ETFs Bring New Users and Trading Opportunities

The Securities and Exchange Commission recently approved the first ETF linked to bitcoin futures, and Coinbase is rooting for the Securities and Exchange Commission (SEC) To approve more Bitcoin ETFs. Haas said this will benefit trading volumes in the cryptocurrency ecosystem and add to wider adoption as some institutions do not have the ability to invest in the underlying cryptocurrency.

But Coinbase’s CFO emphasized that it’s a different market than the current crypto market.

“The spot cryptocurrency markets are global 24/7, and there is never a dull moment in them. But it is clear that the ETF market follows the traditional security timeline,” Haas said.

This means that the ETF market will attract different investors and different use cases.

Haas said the Bitcoin ETFs will benefit the broader spot market, and Coinbase is looking to be a custodian of this market and “has active discussions there about how to support broader ETF adoption.”

While it currently only operates in the spot crypto market, it said Coinbase has ambitions to launch a futures trading business in the United States and has submitted applications for the operation.

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