It occurred to me this morning that I trust Coinbase more than I trust Bitcoin itself.
As THE broker, for all intents and purposes, of any of my cryptocurrency transactions, and the keeper of my wallet, Coinbase is the gatekeeper to anything crypto for me… (at least in terms of Bitcoin, Ethereum and Litecoin).
If you want to trade Cardano, you’ll need to look elsewhere.
How Valuable Is Coinbase?
It was recently revealed that Coinbase earned over $1 billion in 2017. This is amazing for a company that is only a few years old.
It reminds me of when Facebook struck gold…
Kind of like someone finding oil in their back yard.
Instant monopoly.
So what should Coinbase be worth in terms of value? It’s not an apples to apples comparison, of course. But with Bitcoin at the $170 billion market cap level, Coinbase ought to be pretty valuable. Maybe on par with 5% of JP Morgan.
1 JP Morgan is valued at around $400 billion. So 5% of that would be around $20 billion.
Bitcoin’s current market capitalization is $187 billion.
Why Coinbase Should Be Worth More Than Bitcoin
Why should Coinbase be worth more than Bitcoin itself?
Trust.
Trust is the only reason that anything is worth anything.
The dollar has no inherent value, it’s just paper. Bitcoin has no inherent value, other than what the “market” believes it’s worth. Bitcoin may dry up one day… Or it may suck all the cryptocurrency investment into its sapiens mind vortex.
But Coinbase will be around to sell pick axes in the coming gold rush. Whether it’s Bitcoin or another currency.
This is the point, of course.
Your average human has no idea whether any cryptocurrencies are worth anything at all, so they rely on a trusted broker.
If you’re new to cryptocurrencies, you probably need a hand to hold. In the case of other complex items, like insurance or real estate, you usually trust a broker to do the buying and selling work for you.
With cryptocurrencies like Bitcoin, the broker you are trusting is Coinbase.2
Coinbase also helps you by narrowing down to three, among the >1,000 mostly crap cryptocurrencies, allowing you to invest only in:
- Bitcoin
- Litecoin
- Ethereum
- Bitcoin Cash
Coinbase helps you keep your account safe by encouraging you to use a wallet that has insurance.
If the crypto-investing world is going to hell in a handbasket, you can be sure that Coinbase is probably more freaked out than you are… Because they’re in the long game.
At the end of the day, do you trust the currency itself or the individual or firm you are working with to do business with it.
I would say that it’s the latter.
Footnotes
- JP Morgan wants in on Bitcoin. Bad. Jamie Dimon says he doesn’t like Bitcoin, but even if he does think it’s a fraud he probably thinks about it every day. JP Morgan might try to buy Coinbase.
- This is funny and ironic actually because Coinbase is a trusted third party.