Major US-based crypto exchange Coinbase’s latest funding round pulled in $300 million in an ‘opportunistic’ move that now values the company at over $8 billion.
First announced on the company’s blog in a post by President and COO Asiff Hirji, the new funding round was led by American hedge fund and family office Tiger Global Management and also included common crypto venture participants Andreessen Horowitz and Polychain Capital among others.
According to Hirji, the financing will be used to accelerate several of the company’s goals, including:
- Adding ‘hundreds’ of cryptocurrencies to the platform
- Furthering the exchange’s reach globally both in the retail and institutional markets
- Continuing development of projects such as the recently announced stablecoin USDC which is in partnership with Circle
This latest funding round brings the total amount raised by the cryptocurrency exchange up to $525 million, according to Crunchbase.
Coinbase’s Latest Funding Round – Raising Capital that Isn’t Needed
Speaking with Bloomberg, Hirji commented that Coinbase raising another $300 million wasn’t even necessary. Rather it was an opportunity to accelerate the company’s growth plans.
Bloomberg also obtained a document purporting to be Coinbase revenue and profit estimates for 2018. That document shows that the company is expecting to pull in $1.3 billion this year with profits of $456 million.
If those numbers hold to form, it would see Coinbase having increased revenues by nearly 40% and profits by 20% over 2017. All this in 2018, which has overall been a down year for cryptocurrency investors with most major coins including bitcoin and ethereum down significantly.
Bitcoin and Ethereum Prices
Source: Coindesk
Coinbase’s Growth Strategy Potpourri – Funding, Licence Acquisitions and Partnerships
The news regarding Coinbase’s latest funding round caps off a relatively busy year for the exchange. While the overall crypto markets have stagnated, Coinbase has found ways to grow the business and has begun to build services and product offerings that can service customers other than crypto traders and investors.
Coinbase has acquired several companies to integrate the acquired company’s operating licenses within their services. Acquisitions such as that of Keystone Capital in June, which netted the company a US Securities and Exchange Commission (SEC) licence to be a broker-dealer earlier this year have set the company up to innovate and stay on the right side of evolving regulations.
The six-year-old startup has also found growth initiatives by aligning itself with ex-employees who have left to form their own ventures. For example, dYdX, a decentralized financial derivatives startup founded by former Coinbase employee Antonio Juliano, received seed funding from Coinbase CEO Brian Armstrong and co-founder Fred Ehrsam as well as prominent Coinbase investors Andreessen Horowitz and Polychain Capital. That platform is built on the 0x protocol which utilizes the ZRX token, a token that Coinbase recently added to its exchange.
Coinbase’s role in the launch of stablecoin USDC is another move towards expanding the digital asset ecosystem in a way that will benefit Coinbase’s platform. With the recent plethora of stablecoin announcements recently it did not come as a surprise that Coinbase was getting involved in a digital currency pegged to the US dollar.
What was a surprise, however, was that it chose one that was also backed by rival exchange, Circle. The move shows that Coinbase is pursuing bigger goals than being the only game in town.
This excellent table from Diar identifies all of the different ways that Coinbase is aiming to disrupt the incumbent financial system verticals and the path they’ve taken to build up their portfolio.
Coinbase’s Path to Added Functionality
| Function | Company | Growth Path |
|---|---|---|
| KYC / AML | Distributed Systems | Acquisition |
| – | Abacus | Coinbase Ventures |
| Deposits | USD Coin | Consortium Co-Founder |
| – | Reserve | Coinbase Ventures |
| Savings | Compound | Coinbase Ventures |
| Payments | Coinbase Commerce | – |
| – | Celo | Coinbase Ventures |
| – | Spacemesh | Coinbase Ventures |
| Loans | Dharma | Coinbase Alumni |
| Derivatives | dYdX | Coinbase Alumni |
| Security Issuance | Venovate Marketplace | Acquisition (Alternative Trading System License) |
| Security Markets | Keystone Capital | Acquisition (Broker-dealer License) |
| – | Paradex | Acquisition |
| Financial Advisors | Digital Wealth | Acquisition (Registered Investment Advisor License) |
Source: https://diar.co/volume-2-issue-43/#1
The stated mission of Coinbase is to ‘create an open financial system for the world’, the scope of which clearly extends beyond its roots in cryptocurrency. With the $300 million from Coinbase’s latest funding round, the company appears to be accelerating its path towards becoming the ‘bank’ of a future where there are no banks and there doesn’t appear to be any other player close to catching them at this time.
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