The logo of Coinbase Global Inc., the largest cryptocurrency exchange in the United States, is displayed at the Nasdaq MarketSite jumbotron and others in Times Square in New York, USA, on April 14, 2021.
Shannon Stapleton | Reuters
Coinbase will buy $ 500 million in cryptocurrencies on its balance sheet and allocate 10% of its quarterly profits to a portfolio of cryptographic assets, company executives announced Thursday afternoon.
The company plans to invest in “Ethereum, participation proof assets, DeFi tokens and many other cryptographic assets allowed to trade on our platform,” becoming the first public company to do so, the chief financial officer said. Alesia Haas in a blog post.
CEO Brian Armstrong first revealed the brokerage’s plans in a previous tweet, saying he expects the allocation to grow as the market matures. He also indicated the company’s ambitions to diversify its cryptography services and operations, which focus primarily on commerce.
“Hopefully over time we can exploit more of our business in cryptography,” Armstrong said he said on Twitter. “It’s still a mix today.”
The price of bitcoin rose in the news on Thursday, topping $ 47,000 on Friday morning after hitting below $ 45,000 the previous two days. Coinbase shares are more than 1% higher in pre-market trading.
The few companies that have chosen to include bitcoin in their holdings, such as Microstrategy and Tesla (with the help of Coinbase), have done so as protection against inflation and the potential devaluation of the US dollar. On Thursday, Citi reviewed Microstrategy’s rating, suspending its price target and estimates due to its investment in bitcoin and its correlation with the price of bitcoin.
The news comes the week after Palantir reported quarterly results showing he bought $ 50 million in physical gold to cover black swan events. Palantir also said he accepts customer payments in bitcoin, but that none have used the option.
That same week, Coinbase reported quarterly earnings and growth metrics that surprised analysts, who are mostly patient with the correlation of stocks with the price and volatility of Bitcoin and optimistic about their plans to drive innovation around. the existing long-term financial system.
Haas said the investments will be driven by their cryptocurrency custody balances and will be deployed “in a multi-year window through an average dollar cost strategy.” He added that Coinbase invests long-term and “will only divest under certain circumstances, such as an asset being withdrawn from our platform.”
Oppenheimer’s Owen Lau said he doesn’t expect the new investment policy to reduce the correlation between Coinbase and bitcoin “materially in the near future”. However, he said he believes it is a sign that Coinbase can “facilitate and influence institutional and retail adoption” over time by integrating cryptocurrencies into its own operations, such as vendors and employees who they pay, for example.
The news follows a report in the Wall Street Journal this week that Coinbase has stored $ 4 billion in cash to offset regulatory winds. Lau points out that this means that after the bitcoin transaction the company still has a lot of money on hand.
“Stock repurchases and dividends appear to be off the table at least in the short term, but we believe management will use the excess capital to reinvest in the business and make acquisitions, especially in international presence and subscription-based businesses.” , added.