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Crypto platform Coinbase is on its way to be bigger than Goldman Sachs

Jim Armitage
·3-min read
Bitcoin ATM (PA Archive)
Bitcoin ATM (PA Archive)

Ask the big tech guys which experts they rate and there’s always one answer: Professor Scott Galloway.

The New York academic has the rare combination of being stand-up-comic funny, head-of-faculty clever and, more often than not, right.

Galloway was, if not first, then loudest to call out WeWork as an emperor with no clothes, to declare the AirBnB IPO was going to go berserk, to rage that Facebook’s global power was an accident waiting to happen.

And he reckons Coinbase, the crypto currency platform joining Nasdaq this afternoon, will leap to be more valuable than Goldman Sachs.

Is he right? Probably.

Many fortunes in the City have been missed by people who failed to understand crypto. They (we) have fretted that it is merely a strip of computer code, with no underpinning asset of value.

With a few nailbiting crashes along the way, the leading cryptocurrencies ignore the doubters and move on and up.

The big investment banks have for years been most sceptical of all. When the status quo is in your interests, you tend to believe nothing can disrupt it.

Did crypto care? Nope. Like teenagers shaking their heads at their parents’ inability to use a smartphone, crypto gave up trying to explain and carried on progressing with those who “got it”.

A decade ago, Coinbase became one of those and has profited royally on the back of it. In the first quarter of this year, it made profits of $800 million.

How? By helping the oldsters understand what the young folk have been going on about all this time.

By getting in first and closest with regulators, it has become the place for safety-conscious Americans to buy and hold their cryptos while feeling safe that their investments won’t go up in a puff of digital smoke.

Other exchanges are bigger, but don’t have Coinbase’s sense of security - a safe feeling that will be only increased by its stock market listing.

It charges a premium for that, which brings in hefty profit margins.

Doubters fear Coinbase’s upmarket prices make it ripe to be disrupted and undercut by aggressive new rivals.

But with Coinbase having been at this game for a decade, you can assume the moat it has built around it, in terms of tech and goodwill with regulators, is wide.

The biggest question is whether the current interest in crypto will last, sustaining those surging revenues.

The answer has to be yes; crypto and blockchain are among the transformative technologies of our generation.

They will only grow and expand, revolutionising we pay for goods and services, changing the way we document and authenticate the world around us in ways we can’t yet even dream.

But its progress will come in stuttering ways, with stomach-churning gains and falls along the road.

Coinbase stock will gyrate frighteningly alongside them, but I suspect the longer term trend will be upwards.

It will be a frightening ride, but Prof Galloway is probably right.

The bosses at Goldman must have their heads in their hands.

Read More

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