What is Coinbase?
1. What services does Coinbase provide?
2. What is the Coinbase Effect?
3. What other products and companies are part of Coinbase?
4. Who founded Coinbase?
5. How did Coinbase become the main US crypto exchange?
6. How is Coinbase related to USD Coin (USDC)?
7. Is Coinbase safe?
Main
Coinbase is an ecosystem that includes the largest centralized cryptocurrency exchange in the United States, a cryptocurrency wallet, an NFT marketplace, a digital asset custodial service and other products.
The company was founded in 2012 in the United States. In 2021, Coinbase became the first cryptocurrency exchange management company to list its shares on a stock exchange.
What services does Coinbase provide?
Coinbase’s key product is a trading platform for trading and other operations with crypto-assets. It ranks third in terms of trading volume among crypto exchanges.
For professional traders there is a version of the platform called Coinbase Pro with additional features, and for institutional clients – the Coinbase Prime section.
Individual users have access to spot cryptocurrency trading, NFT marketplace, credit secured against bitcoins, as well as a debit card with a link to an exchange account. Coinbase Pro customers can trade with leverage, place limit and stop orders and connect to the exchange’s APIs.
“Chits” Coinbase offers prime brokerage, liquidity for trades, marketplace data and other services.
As of May 2022, more than 170 crypto assets are available on Coinbase and 250 are available on Coinbase Pro. The platform supports accounts in fiat currencies – U.S. dollar, British pound and euro.
What is the Coinbase Effect?
The Coinbase Effect is a short-term change in the price of a cryptocurrency (usually upwards) that occurs after the announcement of its listing on the platform. There are several reasons for this.
On the one hand, the exchange keeps a relatively small list of traded crypto-assets, on the other hand, the information about the start of trading of the new coin is kept secret until the last moment. And since Coinbase is one of the world’s largest digital currency trading platforms, its listing is perceived as recognition of the project’s high quality and high attractiveness of its cryptocurrency.
At the same time, many criticize the “Coinbase effect” because it can give an advantage to insiders. In 2018, the company was even hit with a class action lawsuit alleging insider trading during the listing of Bitcoin Cash (BCH). However, afterwards, the company’s lawyers found no evidence for this claim.
According to Coin Metrics, the “Coinbase effect” is overrated: sharp price increases are often short-lived and lead to equally sharp pullbacks. Much depends on the dominant market trend and liquidity of the coin.
In April 2022, Coinbase decided to change its listing policy. Now the platform publishes an open list of applicants in advance to ensure a fairer environment. It is not known in advance which cryptocurrencies from the list will eventually be added to the exchange.
What other products and companies are part of Coinbase?
In addition to the exchange, Coinbase includes a number of other services:
- Coinbase Wallet. Wallet with support for about 500 cryptocurrencies. Available as a browser extension and mobile application. There is also Dapp Wallet, a special wallet for convenient work with decentralized applications.
- Coinbase NFT Marketplace. A marketplace where you can issue, buy and collect digital assets in the form of NFT tokens. The marketplace is in beta and supports ERC-721 and ERC-1155 standards based on Ethereum.
- Coinbase Commerce processing service. Provides online stores with the ability to accept payments using various cryptocurrencies and their conversion into fiat money.
- Coinbase Custody. A cryptocurrency custody service for institutional customers regulated by the New York State Department of Financial Services.
- Coinbase Card Debit Card. Issued based on Visa, it syncs with an exchange account and allows you to pay for goods and services with cryptocurrencies. In June 2021, Coinbase added support for Apple Pay and Google Pay for its card.
- Coinbase Earn is an educational project where you can get a small amount of coins for watching videos about cryptocurrencies and answering questions about them. Stellar (XLM), ZCash (ZEC), 0x (ZRX) and other cryptoprojects have participated in the program at different times.
- Coinbase Ventures is a cryptocurrency venture capital arm. At the moment, the fund’s portfolio includes more than 250 projects related to such areas as meta-universes, DAO and Web3.
Who founded Coinbase?
Coinbase Global is an American company founded in 2012 by Brian Armstrong and Fred Ersam in San Francisco. Coinbase is currently decentralized: it has no headquarters and all employees work remotely.
Before founding the company, Armstrong was one of the top developers at Airbnb, while Ersam worked as a trader at Goldman Sachs, an investment bank. The former is now the CEO of Coinbase, and his business partner chairs the board of directors. Ersam also founded Paradigm, which runs the world’s largest crypto venture capital fund.
Other key Coinbase employees include chief operating officer Emily Choi, chief technology officer Manish Gupta and chief financial officer Alesia Haas.
How did Coinbase become the main US crypto exchange?
In the summer of 2012 the startup team was accepted into the famous business incubator Y Combinator, and already in the fall ArsMtrong, Ersam and their associates presented a service for buying and selling bitcoins with the help of bank transfers.
Coinbase conducted its first investment round in 2013. Its key participants were Andreessen Horowitz, Ribbit Capital and Union Square Ventures. Within a year, the number of users of the platform reached one million people. The total amount of funds raised by the company since 2013 is estimated at more than $500 million.
Gradually Coinbase signed agreements with major payment systems – Stripe, Braintree and PayPal, which were able to process bitcoin transactions thanks to this cooperation.
In the spring of 2021, Coinbase became the first publicly traded cryptocurrency exchange management company in the U.S. to list directly on a stock exchange. Its shares are traded on NASDAQ under the ticker COIN.
At the start of trading, the COIN rate reached $430, and the value of the exchange exceeded $100 billion. Optimism around the cryptocurrency market contributed to the rise in the share price. Thanks to this, the value of Coinbase briefly exceeded the capitalization of the operators of the largest U.S. stock exchanges – the New York Stock Exchange and NASDAQ.
However, the price of COIN later fell, after which the law firm Scott + Scott sued Coinbase for misleading investors. Coinbase also provided misleading information regarding the Japanese yen-linked GYEN steiblocoin, after which it was sued collectively.
The bearish trend in the crypto market in 2022 was reflected in Coinbase’s performance. According to its financial report, the exchange received a net loss of almost $430 million in the first quarter, which significantly exceeded forecasts. At the same time, back in October-December 2021, its net profit was $840 million.
At the beginning of June 2022, Coinbase shares were trading at around $70 and had a capitalization of over $15.2 billion.
How is Coinbase related to USD Coin (USDC)?
Coinbase together with Circle is the issuer of the popular stablecoin USDC, available in various blockchains. The asset ranks second among stable coins by capitalization after USDT.
At the end of March 2021, Visa payment system launched a pilot program to integrate USDC payments into its network.
Since 2022, the custodian of USDC reserves is a major U.S. bank BNY Mellon. The issuer of the stabelcoin conducts regular audits of the funds.
Is Coinbase safe?
Coinbase users’ dollar funds are protected by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.
According to official statements, the company keeps 98% of customer funds in cold wallets that are not connected to the internet. A special insurance policy covers the remaining 2%.
In early 2022 Coinbase introduced a new compliance tool, Coinbase Intelligence. According to the company, it is able to detect illegal transactions through API with the help of a scoring system, as well as to track the movement of funds and detect fraudulent transactions.
Coinbase was also the first cryptocurrency exchange to be allowed to operate in the UK.
