Here Comes Coinbase

With US CPI and this week’s Treasury supply having come and gone with barely a stir, markets turned their attention to earnings and crypto.

Goldman delivered a predictably robust quarter, while the market reaction to JPMorgan’s solid results seemed to reflect consternation at Jamie Dimon’s cautious remarks around loan demand.

Headlines on Wednesday were poised to be dominated by the digital, if you will. Bitcoin hit $64,000 ahead of Coinbase’s direct listing, which got a $250 reference price from Nasdaq and traded privately at a ~$90 billion valuation early last month, according to media reports.

As anticipation built, folks pointed to other large direct listings and the generalized state of excitement in noting that shares of the largest US crypto exchange likely wouldn’t be available for the “bargain” price of $250.

“I will not be selling any of my Coinbase stock to you at $250,” Barry Silbert declared. “Try again.”

That’s fine Barry. I will not be buying any of your Coinbase stock at $250. Or any other price, for that matter.

I’m just kidding. I mean, not really. I wouldn’t take a piece of this unless you offered it to me for free or something close to free. Honestly, I’d rather have some kind of option on it than I would the shares. I suppose it’s possible that folks skeptical of holding crypto itself might see Coinbase as an attractive alternative, despite a laughably long list of risk factors and, as of a previous filing, the absence of a physical door to go knocking on in the event you have questions that can’t be addressed over the phone or through email.

Sarcasm aside, none of the above is to say it won’t blow the doors off. It’s just that with an ocean of central bank liquidity virtually ensuring that anyone with a pulse can do just fine for themselves without dabbling in crypto, you’d have to be a greedy adrenaline junkie to bother yourself with something like this — or at least that’s my opinion.

There were no shortage of ridiculous soundbites to choose from ahead of Coinbase’s listing.

One person who spoke to Bloomberg Television said “Coinbase is this decade’s Microsoft, Google or Facebook.” Another called the listing “a huge step forward.” (No Mao jokes allowed.)

In a recent filing, Coinbase said monthly transacting users were 6.1 million in Q1. The platform’s assets, at more than $230 billion, represented an 11.3% crypto market share. Total revenue is estimated at $1.8 billion. Net income for Q1 is seen between $730 million and $800 million.

“Crypto markets have observed four major price cycles since 2010 which have typically had durations ranging from two to four years,” the company mused, in the same filing, adding that,

On average, these price cycles have increased the overall crypto market capitalization significantly from the prior cycle and attracted new users into the cryptoeconomy. These cycles can be highly volatile, and as a result, we measure our performance over price cycles in lieu of quarterly results. We believe that we can create long-term value throughout these price cycles.

Again, my response to that is: “No thank you.” But I’m biased. I’ve taken enough risk in my life. In a handful of cases, the nature of those risks would be unfathomable not just to some HODLing crypto fanatic, but also to any gunslinging family office. I’m done with the risk. For those of you who haven’t had enough excitement for one lifetime, maybe you’ll enjoy riding these “price cycles” with Coinbase.

A former board member imagined the company will be “like a crypto version of a Goldman Sachs.” “They’re going to build out a full financial services company,” he said.

Maybe I’m just old fashioned. But I’d venture that if there’s going to be “a crypto version of a Goldman” it won’t be “like” Goldman, it will just be Goldman. That assessment is supported by the fact that, just a few weeks ago, the bank’s Mary Rich told CNBC that Goldman is “working closely with teams across the firm to explore ways to offer thoughtful and appropriate access to the ecosystem for private wealth clients… in the near term.” She clarified, noting that Goldman plans to offer the “full spectrum” of choices, “whether that’s through physical Bitcoin, derivatives or traditional investment vehicles.” Morgan Stanley was set to make a similar offer to wealthy clients.

I could be wrong, but if the crypto world really does gain as much traction as proponents imagine and nobody in Washington decides to regulate it so heavily that it becomes too cumbersome to deal with, Wall Street will milk it for everything it’s worth, crowding out (or buying out) everyone else in the process. Crypto proponents will tell you traditional banks are too far behind the curve or spin some other such narrative, but if there’s money to be made and clients are interested, Wall Street will be there. Period. And that’s another reason I’ve harbored reservations about crypto for so long. It’s not clear to me why, if everyone was so interested, banks aren’t falling all over themselves to get involved.

In any case, I’d be remiss not to mention Coinbase Wednesday. And I’m sure I’ll begrudgingly be compelled to mention it further in the future.

Then again, “begrudgingly” isn’t really the right word. This is sure to be a wild rollercoaster both for the company and its shareholders. And I like a wild rollercoaster. Just as long as I’m not on it.