We’re going to talk about what Coinbase is, why cryptocurrency is in fact the future and that Coinbase is in a tremendous position, as a business, to take advantage of this fact. We’re then going to touch on the risks associated with investing in crypto related ventures in general so that you have an end to end perspective of the pros & cons of investing in Coinbase.
What is Coinbase
Coinbase is a platform that let users buy, sell, and store a vetted set of cryptocurrencies. They do this to make sure that on a high level, whatever crypto they make available for users on Coinbase, it’s at least reached critical mass in terms of the crypto community accepting that flavor’s legitimacy.
This does 2 things, 1) this creates better trust for the users on the Coinbase platform, somewhat guaranteeing that the money you put in didn’t go into fraud, and 2) the cryptocurrencies that are made available have a much higher chance of exploding in value due to better transactional exposure.
This is why for several years, people were buying crypto in a way where they were trying to predict what coinbase was going to make available next.
What can Cryptocurrency Do
Now in order for you to invest in Coinbase, I highly encourage that you at least know what cryptocurrency is. Cryptocurrency is a collection of unique identifiers that can be tracked and verified, just like each dollar Bill is a unique identifier that can be tracked and verified, except this is digital and virtually impossible to counterfeit.
The most basic basic example is that imagine you are trying to wire some money from one bank to another bank. This process costs you a lot of money, costs the banks a lot of resources, and costs a lot of time.
With crypto, it will cost you a fraction of that money, costs minimal amount of resources to achieve this transaction, and the transaction itself will happen in minutes if not seconds. If you want more detail, this one channel put out 5 levels of explanations on crypto that I think is great; I’ll link it below.
All in all, there is real value in the existence of crypto and that’s just ONE of its potential applications. But for the record, whether I think the PRICE of these cryptos make sense or not is a completely different matter. Each cryptocurrency on coinbase, generally speaking, was created for some specific purposes in mind, so all of them each can be used as monetary substitutes but they do and work differently.
Now the thing with crypto, just like money, is that if you have a mass that thinks there is value, then it has value. For example, more and more people thinks bitcoin has value, is using it for reasons that relates to physical value, is using as investment hedges which in-itself creates value and legitimacy, and therefore it will continue to build value. Similarly, if you have a crypto idea where people initially thinks it has value but then a year people no longer think so then it becomes a shit coin and dies.
The Beauty of Platforms
However, the beauty of ANY platform that has reached critical mass is that regardless of all of that, as long as there are cryptos that create value and transactions then Coinbase will be alive, used, and making money, because above all else, they are first to market, is now a brand name, and is trusted.
But would are there risks in investing in Coinbase right now? If you’re watching this right after the IPO, then absolutely, because almost every stock get super frothy and then tanks, regardless of how good the business value is. There are a lot of reasons for this that makes this effect pretty inevitable. The second risk is that cryptocurrency is like the Wild West right now. You can make a ton of money playing crypto because regulations are virtually non-existent. This to me also means that WHEN regulations come, the platforms will probably get tagged, traders might be less enthused, and it has a potential of affecting Coinbase’s bottom line. Who knows when, but that to me has to happen. Lastly, Coinbase does have a healthy list of competitors, but in my opinion none as prominent as Coinbase YET. The real contender that’s coming up is in my opinion BlockFi and Kraken. For the sake of length in this content, I’m not going to dive into it, but being that it’s so easy to transfer money back and forth in and out of services, I reckon consumer sentiments can change REAL fast, leaving a company like Coinbase a shell, if they don’t start offering differentiating value propositions.