• Coinbase has gotten the green light to invest $500 million in leading cryptocurrencies to its balance sheet.
  • The firm aims to be the first publicly-traded company to hold Ether, DeFi tokens and various digital assets.
  • The crypto exchange will reinvest 10% of its net income into the new asset class.
  • Coinbase has received approval from its board to make a purchase of over $500 million worth of cryptocurrencies on its balance sheet. The firm would also reinvest future profits in the new asset class.

    Coinbase continues to bet big on crypto

    As part of the company’s filing for its direct listing on the Nasdaq, the firm revealed that it was holding roughly $365 million in cryptocurrencies.

    Don’t believe me? Let’s dig into it

  • First, let’s look at how the original 4 cryptos listed on Coinbase have performed against BTC since being listed. All were marketed as competitors to Bitcoin. Since being listed, 3 of the coins are down 80% against Bitcoin. Only ETH has outperformed (we’ll get to this later).
    [Mish Comment: Chart 3 Below]
  • Next was the ICO craze. Despite most of these ICO coins having little to no liquidity or even working products, Coinbase listed them on their platform anyways. They looked past the red flags and instead saw it as an opportunity to collect listing fees and expand its product.
  • Once the coins were listed on Coinbase and the early investor lock-up periods ended, these insiders had a large platform to dump their positions on unsuspecting investors & walked away with massive profits.
  • Coinbase to invest profits in crypto

    In a tweet, Armstrong, co-founder and head of the platform, said Coinbase would also be investing 10% of all profits in crypto.

    In a late-Thursday blog from Coinbase, CFO Alesia Haas expanded on Armstrong’s tweets.

    “We believe in the cryptoeconomy, a future where economic transactions–buying, selling, spending, earning–will be based on crypto assets,” she wrote.

    “This means we will become the first publicly traded company to hold Ethereum, Proof of Stake assets, [decentralized finance] tokens, and many other crypto assets supported for trading on our platform, in addition to bitcoin, on our balance sheet,” Haas wrote.

    Coinbase (COIN), as of Dec.

    Coinbase to invest profits in cryptocurrency

    Coin supply myth

    Contrary to popular myth, the supply of Bitcoins does not decrease when it halves,

    A Bitcoin halving is when the payout for mining a new block is halved. This happens after every 210,000 blocks (approximately four years).

    Halving limits the increase in the number of Bitcoins over time, but that does not decrease the supply. Instead, halving decreases the rate of increase of supply.

    The supply of Bitcoin is every coin ever mined minus those with lost keys.

    Every second of every day interested parties have to address a simple set of questions.

    Decision time 100% of the time

    • Holders: Do I hold Bitcoin or would I rather hold something else?
    • Potential Buyers: Do I buy Bitcoin, something else, or nothing at all?

    It’s important to understand there is nothing unique about Bitcoin.

    Coinbase to invest profits in cryptography

    Most of them I have never even heard of. (Pawtocol…anyone? lol) Apparently, business has been good in the coin listing business.

  • It’s important to understand the game at play here…when a sh*tcoin is created, early investors typically make investments, a development team is formed, and a % of the coins are issued to these insiders at extremely low prices.
  • This insider allocation usually occurs in the form of a “pre-mine.” This is an aptly named term to describe coins that are given to early investors & the team before the general public has the ability to mine or buy them. This is similar to a startup issuing equity to investors.
  • The subject came up again today.

    “Once Ethereum becomes proof of stake officially and risk is mostly eliminated ….

    AND risk is mostly eliminated!?

    Sorry, that’s either ignorance or a lie. I see similar statements about Bitcoin all the time.

    Crypto beginnings

    Bitcoin launched in January of 2009. It has never seen any environment than endless Fed pumping, low interest rates, and extreme QE liquidity supporting all asset prices.

    Liquidity also explains the rise of hundreds if not thousands of altcoins, all inherently worthless.

    Even if we give Bitcoin and Ethereum first mover advantage, no one can possibly know how either will perform in an inflationary environment in which the Fed is hiking and for the first time stating an aggressive QT (Quantitative Tightening) policy.

    Mish Comment: Chart 2 Below]

  • After the launch, if the coin gains in popularity and is listed on a large exchange, the VCs and other insiders then have the opportunity to dump their holdings on retail traders who are sold the narrative that the sh*tcoin is “the next big thing” or is “better than Bitcoin.”
  • These VCs and teams typically don’t care about the product or “innovation” of the sh*tcoin. The goal IS to get listed on an exchange. The product IS to dump tokens, that were produced with 0 cost, onto retail investors and 1000x their investment with 0 work. What a product!
  • I call this the “The Insider Exchange Dump”.
    This strategy has been used under many different names such as ICOs, DeFi, and NFTs, but the outcome remains the same — the insiders get richer, and the outsiders lose their life savings.
  • The same applies to the stock market, the bond market, currency traders, even home owners.

    Questions abound

    Do I want to hold this asset or something else?

    If someone is willing to sell you a Bitcoin for $30,000, ask yourself why. What is it that they think they know that you think they don’t.

    Are the sellers “Bitcoin Whales” deciding to cash out? Newbie greater fools who has had enough?

    I don’t know, and you don’t either. Yet, the pretending goes on: “Bitcoin always will rise.”

    Anyone who makes that statement is a liar, a fool, or a charlatan hoping you are their greater fool.

    Cash isn’t trash

    Even in inflationary environments, cash is not trash.

    • Cash is down about 10% this year to price inflation (except vs assets).
    • Bitcoin is down about 56%.
    • LUNA is down about 100%.

    Anyone who follows me has to know that I am not a fan of crypos, including Bitcoin.

    But I especially went after the obvious fraud pretenders including LUNA and DOGECOIN, the latter hyped by Elon Musk.

    Perhaps Sam feels the same way that I do and have commented on many times. “I follow lots of people on Twitter I disagree with and learn more for them than I do with people echoing my thoughts.”

    Hopefully, the above Tweet thread by Callahan sheds a lot of light on what is happening in the crypto space.

    You just don’t understand

    Coinbase chart

    Coinbase chart courtesy of StockCharts.Com, annotations by Mish

    Coinbase is the 8th largest position of Cathie Wood’s ARK fund.

    Here’s how 10 popular ICOs have performed against BTC after being listed. [Mish Comment: Chart 4 Below]

  • As you can see, every single one of these ICOs have underperformed BTC since they were listed on Coinbase. A majority of these hyped ICO tokens are deeply negative against BTC, with an average drawdown of -58%. And yet, Coinbase still rarely markets BTC to clients…weird.
  • Next was the DeFi craze.

    Coinbase was quick to list & market these tokens despite the heightened operational, security, and regulatory risks that came with them. SBF was on a recent podcast explaining what DeFi was, and it led Bloomberg Journalist Matt Levine to respond with. [Mish Comment: Chart 5 Below]

  • Here’s how these DeFi coins have performed against BTC since being listed on Coinbase. After being heavily pushed on their clients, these DeFi tokens are completely rekt against BTC.
  • If a customer of Coinbase heeded their advice, they would have lost money on these sh*tcoins instead of simply saving in the less risky asset, Bitcoin, for the long term. [Mish Comment: Chart 1 Below]

  • Coinbase’s marketing is highly skewed towards sh*tcoins that are riskier and less secure than BTC. Their education around BTC is atrocious. They don’t want their clients buying and holding BTC cuz they want them to trade themselves into oblivion & collect those sweet tx fees.
  • It’s important to note that Coinbase also makes money off of listing fees. They constantly push the sh*tcoins they list on their unsuspecting clients who end up losing their life savings thinking they are buying the “next Bitcoin” Coinbase promoted LUNA.
  • In 2017, Coinbase had 4 coins outside of Bitcoin listed on their platform.
    Fast forward to today, and Coinbase offers 161 cryptocurrencies.
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