Coinbase: new $500 million purchase in cryptocurrency
Coinbase revealed today that they will execute a new $500 million purchase in cryptocurrency, adding that 10% of all future profits will again be invested in cryptocurrencies.
Announcing on social Twitter was Coinbase’s CEO Brian Armstrong:
We recently received board approval to purchase over $500M of crypto on our balance sheet to add to our existing holdings. And we’ll be investing 10% of all profit going forward in crypto. I expect this percentage to keep growing over time as the cryptoeconomy matures.
— Brian Armstrong (@brian_armstrong) August 19, 2021
Not only that, according to reports on Coinbase’s official blog, the intention of this substantial investment by the leading U.S. exchange seems to be to affirm the vision of wanting to operate only in cryptocurrency and no longer use fiat currencies.
Coinbase and the new investment policy in cryptocurrency
Listed on the Nasdaq since April 14, 2021, and with over 68 million verified users, Coinbase is a valuable behemoth for the mass adoption of cryptocurrencies.
Not only that, the platform laments that all corporate financial transactions such as paying suppliers, employees, or investing corporate money remain heavily weighted in fiat.
That’s why the decision to update this policy of investing heavily in cryptocurrencies seems like it could become the perfect example to push the crypto-economy into corporate practices as well.
In this regard, Coinbase describes the following:
“We have committed to invest $500M of our cash and cash equivalents. Going forward, we will also allocate 10% of quarterly net income into a diverse portfolio of crypto assets. This means we will become the first publicly-traded company to hold Ethereum, Proof of Stake assets, DeFi tokens, and many other crypto assets supported for trading on our platform, in addition to Bitcoin, on our balance sheet.”
The idea is really to increase Coinbase’s cryptocurrency allocations over time.
A true long-term investment strategy the crypto-exchange described as follows:
“Our investments will be continually deployed over a multi-year window using a dollar-cost averaging strategy. We are long-term investors and will only divest under select circumstances, such as an asset delisting from our platform.”
The position of the leading U.S. crypto-exchange
Coinbase also explained that it wants to support COIN stock stakeholders.
Earlier this month, a negative outlook for COIN was published precisely because it related to the bear market experienced by cryptocurrencies. At that time, the estimate was to see the stock drop to $210.
And instead, the letter sent to stakeholders by Coinbase the following week, with data for the second quarter, does not seem to reflect that forecast.
Coinbase’s Q2 generated $2 billion in revenue with a 26% increase over Q1, just for retail transaction revenue.
Institutional transaction revenue also saw a 20% increase over the previous quarter, while revenue and subscriptions grew 82%.
At the time of writing, COIN is worth $248, far from the estimated forecast of $210 and -24% from its initial launch value.
Coinbase’s massive investment today could be an excellent strategy to re-evaluate the platform on both sides, therefore. The announcement, in fact, comes just the day after the same platform launched its services in Japan, setting a partnership with Mitsubishi UFJ Financial Group (MUFG), one of the largest banks in the country with 40 million customers.