7 ms·

Coinbase as a business, at least one that is traded publicly, never made sense during off cycles for crypto at their current scale. It makes sense in that it'll

Coinbase as a business, at least one that is traded publicly, never made sense during off cycles for crypto at their current scale. It makes sense in that it'll still be a business, and can certainly still make money, but it's extremely seasonal. Coinbase during a crypto bear market might be "worth" 10-100x less than what it might be worth in a bull market. As such, I imagine they'll have these wild swings every 4-6 years. I think many people don't realize just how incredibly stagnate and boring crypto is when it's not consuming every part of everyone's online identity. The bad news is that for companies like Coinbase they essentially have to drastically downsize every few years. The good news is that with proper planning, they can really make the profits from a bull market last.

CPLX 4y ago
This whole premise assumes that “crypto” will be a thing long enough to be cyclical.
- aaronharnly 4y ago
  I expect that it will continue to be the preferred mechanism for paying criminals. It genuinely improves on the experience for both criminal and victim vs alternatives like wire transfers and cash. There is a decently large market for paying criminals (illegally but also legally, eg ransomware), so some base level can be expected to continue.
  - gentoo 4y ago
    Law enforcement and private surveillance companies are currently investing a ton of effort into using public blockchains (which is most of them) to unmask participants in crypto transactions. At the same time, they're putting more pressure on Coinbase and friends to do aggressive KYC, and Congress keeps considering bills that would effectively outlaw anonymous crypto purchases. It's not going to be the safest way to collect ransoms for long, if it even is today.
  - kebman 4y ago
    It's mostly stupid criminals who accept crypto since it's much more easy to trace than cash. Privacy coins are a completely different matter tho.
    - giaour 4y ago
      This is why I follow Carmen San Diego's example and only accept looted treasures as compensation for my crimes.
- i_like_waiting 4y ago
  Well in case that it won't be a thing long enough, then there will be no coinbase in current business model, so I guess its correct strategy.
- ryanSrich 4y ago
  We're past a decade already. I think gambling is pretty popular. So I expect it to only increase in popularity until it inevitability gets regulated into the dirt.
iLoveOncall 4y ago
Coinbase doesn't need to care about the value of crypto, it makes money on fees when people buy or sell against USD. All it should care about is the traded volumes, and they don't necessarily have to be a lot lower in a bear market.
- ascendantlogic 4y ago
  But they almost always are a lot lower during bear cycles.
- puranjay 4y ago
  Volume dies completely in bear markets We’re not even in a proper bear market and its already collapsing Just see dex trading volume metrics or OpenSea volume data on Dune.com - a much better indicator of the state of the crypto markets since you can’t hide on chain data
- ryanSrich 4y ago
  Volume barely exists during a bear market. Attention is the currency by which crypto lives and dies. Even negative attention is attention. A bear market is the lack of attention. It has nothing to do with the macro price of any coin.
- JumpCrisscross 4y ago
  > Coinbase doesn't need to care about the value of crypto, it makes money on fees when people buy or sell against USD Coinbase ran a gambling business like an exchange business. That's their mistake. The guys who knew they were running unregulated slot machines are doing fine.
- matwood 4y ago
  The value of crypto drives interest and thus trading volumes.
- wombat-man 4y ago
  The problem is, there are a number of other exchanges out there, and they are going to need to get competitive on fees. They aren't the only game in town now and other exchanges are advertising heavily.
adamsmith143 4y ago
Don't see why that should be the case. Unless there are massive swings in the number of trades, setting a flat rate for transactions should insulate them from the actual prices of crypto assets.
- puranjay 4y ago
  Volume goes down, fees collected go down Crypto trade volume collapses catastrophically in bear markets
- ryanSrich 4y ago
  > Unless there are massive swings in the number of trades, Precisely. Holders HODL during bear markets. Traders go bankrupt. New money stays on the sidelines. Everyone else forgets about crypto for a few years.
bluk 4y ago
As far as the Coinbase marketplace, it may have “seasons” but the margins from fees will probably shrink over time regardless. A recent episode from Crypto Critics’ Corner ( https://anchor.fm/cryptocriticscorner/episodes/Cryptocurrency--Coinbase--and-Contagion-Feat--Jim-Chanos-e1j6tkf https://anchor.fm/cryptocriticscorner/episodes/Cryptocurrenc... ) covered some of the headwinds facing Coinbase. Coinbase (at least the CEO) claims this is not a problem so it will be interesting.
puranjay 4y ago
Crypto is the future of finance in bull markets Its a total scam in bear markets That’s pretty much the sentiment across the board I do wonder how SoftBank investing $680M into SoRare at the height of the NFT boom is going to work out. If SoRareStats is correct, they did 170Eth of auction volume in 24 hours. If they have the same fees as OpenSea, that’s roughly $8,000 in daily revenue.
- ryanSrich 4y ago
  > I do wonder how SoftBank investing $680M into SoRare at the height of the NFT boom is going to work out. This only goes one way, and that way is down.
  - puranjay 4y ago
    Yep. OpenSea, too, raised funding at 13B valuation right at the peak of the NFT mania I don’t understand how VCs work. I was deep in the NFT world at that time and outside of the influencers on Twitter, every single trader I know was just in it to dump NFTs on someone else. And everyone knew that it wasn’t sustainable at all. How can VCs look at something like this, abandon all common sense and buy in right at the top of a mania phase?
    - ryanSrich 4y ago
      Yeah I've thought about this a lot too. My only guess is that these VCs never really felt the pain from the previous cycle collapses. I made and subsequently lost a very large sum of money from 2015 to 2018. This happened because I bought into the ICO craze and after seeing 1000x gains I saw almost all of it evaporate. So to me, NFTs reeked of the same odor. I was smart enough this cycle to stick with projects that made sense to me. NFTs didn't make sense, and even though I saw people making money on them, I knew the risk was too high. I think another learning point for me was letting go of romanticizing crypto as a technology and embracing it for what it truly is, which is gambling. I don't think crypto is the future of anything other than online gambling and speculation. Which isn't necessarily a bad thing, but it's the reality. VCs seem stuck in that romantic phase coupled with a lack of technical understanding. I think after they get burned this cycle they'll be less likely to invest in the next. They'll have the experience to know.

CPLX 4y ago

This whole premise assumes that “crypto” will be a thing long enough to be cyclical.

aaronharnly 4y ago
I expect that it will continue to be the preferred mechanism for paying criminals. It genuinely improves on the experience for both criminal and victim vs alternatives like wire transfers and cash. There is a decently large market for paying criminals (illegally but also legally, eg ransomware), so some base level can be expected to continue.
- gentoo 4y ago
  Law enforcement and private surveillance companies are currently investing a ton of effort into using public blockchains (which is most of them) to unmask participants in crypto transactions. At the same time, they're putting more pressure on Coinbase and friends to do aggressive KYC, and Congress keeps considering bills that would effectively outlaw anonymous crypto purchases. It's not going to be the safest way to collect ransoms for long, if it even is today.
- kebman 4y ago
  It's mostly stupid criminals who accept crypto since it's much more easy to trace than cash. Privacy coins are a completely different matter tho.
  - giaour 4y ago
    This is why I follow Carmen San Diego's example and only accept looted treasures as compensation for my crimes.
i_like_waiting 4y ago
Well in case that it won't be a thing long enough, then there will be no coinbase in current business model, so I guess its correct strategy.
ryanSrich 4y ago
We're past a decade already. I think gambling is pretty popular. So I expect it to only increase in popularity until it inevitability gets regulated into the dirt.

iLoveOncall 4y ago

Coinbase doesn't need to care about the value of crypto, it makes money on fees when people buy or sell against USD. All it should care about is the traded volumes, and they don't necessarily have to be a lot lower in a bear market.

ascendantlogic 4y ago
But they almost always are a lot lower during bear cycles.
puranjay 4y ago
Volume dies completely in bear markets We’re not even in a proper bear market and its already collapsing Just see dex trading volume metrics or OpenSea volume data on Dune.com - a much better indicator of the state of the crypto markets since you can’t hide on chain data
ryanSrich 4y ago
Volume barely exists during a bear market. Attention is the currency by which crypto lives and dies. Even negative attention is attention. A bear market is the lack of attention. It has nothing to do with the macro price of any coin.
JumpCrisscross 4y ago
> Coinbase doesn't need to care about the value of crypto, it makes money on fees when people buy or sell against USD Coinbase ran a gambling business like an exchange business. That's their mistake. The guys who knew they were running unregulated slot machines are doing fine.
matwood 4y ago
The value of crypto drives interest and thus trading volumes.
wombat-man 4y ago
The problem is, there are a number of other exchanges out there, and they are going to need to get competitive on fees. They aren't the only game in town now and other exchanges are advertising heavily.

adamsmith143 4y ago

Don't see why that should be the case. Unless there are massive swings in the number of trades, setting a flat rate for transactions should insulate them from the actual prices of crypto assets.

puranjay 4y ago
Volume goes down, fees collected go down Crypto trade volume collapses catastrophically in bear markets
ryanSrich 4y ago
> Unless there are massive swings in the number of trades, Precisely. Holders HODL during bear markets. Traders go bankrupt. New money stays on the sidelines. Everyone else forgets about crypto for a few years.

bluk 4y ago

As far as the Coinbase marketplace, it may have “seasons” but the margins from fees will probably shrink over time regardless. A recent episode from Crypto Critics’ Corner ( https://anchor.fm/cryptocriticscorner/episodes/Cryptocurrency--Coinbase--and-Contagion-Feat--Jim-Chanos-e1j6tkf https://anchor.fm/cryptocriticscorner/episodes/Cryptocurrenc... ) covered some of the headwinds facing Coinbase. Coinbase (at least the CEO) claims this is not a problem so it will be interesting.

puranjay 4y ago

Crypto is the future of finance in bull markets Its a total scam in bear markets That’s pretty much the sentiment across the board I do wonder how SoftBank investing $680M into SoRare at the height of the NFT boom is going to work out. If SoRareStats is correct, they did 170Eth of auction volume in 24 hours. If they have the same fees as OpenSea, that’s roughly $8,000 in daily revenue.

ryanSrich 4y ago
> I do wonder how SoftBank investing $680M into SoRare at the height of the NFT boom is going to work out. This only goes one way, and that way is down.
- puranjay 4y ago
  Yep. OpenSea, too, raised funding at 13B valuation right at the peak of the NFT mania I don’t understand how VCs work. I was deep in the NFT world at that time and outside of the influencers on Twitter, every single trader I know was just in it to dump NFTs on someone else. And everyone knew that it wasn’t sustainable at all. How can VCs look at something like this, abandon all common sense and buy in right at the top of a mania phase?
  - ryanSrich 4y ago
    Yeah I've thought about this a lot too. My only guess is that these VCs never really felt the pain from the previous cycle collapses. I made and subsequently lost a very large sum of money from 2015 to 2018. This happened because I bought into the ICO craze and after seeing 1000x gains I saw almost all of it evaporate. So to me, NFTs reeked of the same odor. I was smart enough this cycle to stick with projects that made sense to me. NFTs didn't make sense, and even though I saw people making money on them, I knew the risk was too high. I think another learning point for me was letting go of romanticizing crypto as a technology and embracing it for what it truly is, which is gambling. I don't think crypto is the future of anything other than online gambling and speculation. Which isn't necessarily a bad thing, but it's the reality. VCs seem stuck in that romantic phase coupled with a lack of technical understanding. I think after they get burned this cycle they'll be less likely to invest in the next. They'll have the experience to know.