Circle vs. Coinbase: Implications of Poloniex Acquisition

Circle vs. Coinbase

Over the weekend, I saw an article about how Coinbase wants to become the next Google.

But this morning it was announced that Circle acquired Poloniex, the Boston, MA based cryptocurrency trading platform.

Circle, which was founded by Jeremy Allaire, is backed by Goldman Sachs, among others. Allaire is legendary as the founder of video platform, Bright Cove.

What Does Circle Do?

Before the acquisition of Poloniex, Circle had two primary businesses:

  1. Circle Pay – A free Venmo/Apple Pay Cash competitor for the consumer market
  2. Circle Trade – A business to business cryptocurrency trading platform

Circle Pay uses open internet standards and protocols, including blockchain, to provide money transfer services for free.

Circle Trade, a cryptocurrency trading platform, processes approximately $2 billion in cryptocurrency transactions per month, with a minimum transaction size of $250,000.

Circle Trade’s customers are mostly the “crypto whales”, hedge funds, such as Pantera Capital, platforms such as Barry Silbert’s “Genesis Trading” and banks.

According to an article by Fortune, Circle is preparing to launch “Circle Invest“, a consumer market focused micro-investing platform, similar to Acorns, Wealthfront, Betterment or Robinhood1

But for cryptocurrencies.

Poloniex Acquisition Throws Gasoline on the Crypto Fire

With the acquisition of Poloniex, Circle is primed to compete with Coinbase, the leader in cryptocurrency trading in the U.S. Kraken is another competitor on the horizon.

Poloniex was one of the first crypto trading platforms to offer customers access to Ether.

Over time, Allaire believes, as apparently does JPMorgan, that cryptocurrency investments will have a legitimate place in a diversified asset portfolio.

Indeed, the rise of “asset backed tokens” promise to make fractional investing in physical assets easy, and accessible from anyone’s smartphone.

The trading of asset backed tokens has huge implications for digital asset and cryptocurrency trading platforms, such as Circle and Coinbase.

By “tokenizing” hard, investable assets, crypto-investors can (in theory anyway) reduce their downside risk, and gain upside risk with exposure to assets such as real estate, cars, patents, stocks, rare wines, artwork and other assets.

The Rise of Dividend Cryptos

The evolution of cryptocurrencies as investments make crypto-dividends inevitable.

Token platforms such as Ethereum, make the fractional distribution of additional cryptocurrencies possible for investors through “smart contracts”.

Of course, the benefit of dividends is that, with smart investing over time, compound interest takes over.

With a patient algorithm working for you in your sleep, you have the chance to become a crypto Warren Buffett.

Both Circle and Coinbase are well-positioned for the crypto investment future.

Footnotes

  1. Robinhood is accepting “early applications” to join “Robinhood Crypto” its new cryptocurrency platform