Coinbase Is Cheaper Than Dogecoin

Plus: Uniswap's integration with Banks, Visa crypto auto payments

December 21, 2022

GM 👋🏻 - Happy hump day. Hope y'all are drinking those coffees. SBF signs his extradition papers and QuadrigaCX is back from the dead. Coinbase stock slumps, making the company worth less than Dogecoin 🐕 - Yay bear market! 🐻

In Today's Email:

  • What Matters: Coinbase stock hits all-time low 📉

  • Case Study: Visa works on crypto auto-payments 💳

  • Features: Uniswap FIAT integration 💸

WHAT MATTERS

Coinbase Stock Hits ATL

State of play: The crypto bear market is in full swing. Shares of Coinbase (COIN) hit a new all-time low, putting the firm's market cap under $8 billion. It's down (-91%) from its IPO price in April 2021. For reference, Dogecoin is worth $10 billion. The firm's metrics are better than ever. More assets held, more users, and higher revenue - but also a significantly higher burn rate. So... why is this dangerous? 🤔

  • Coinbase is still unprofitable. The firm burned $2 billion in the past 3 quarters, with ~$5.3 billion of cash in hand. Unless it makes cost adjustments, the unprofitable firm has 1-2 years of runway without further selling of its shares 😱

  • Some people are buying the dip: Cathy Wood of ARK continues to buy COIN during the dip, amounting to $228M. Co-Founder Fred Ehrsam bought $76.8M. Coinbase Board Member and Shopify CEO Tobias Lütke bought $7.2M.

Why it matters: Coinbase is the most reputable crypto business. It's the only US-based publicly-listed crypto exchange. It's highly unlikely that Coinbase will run into some sort of insolvency problem due to strong US regulations, but it will be unfortunate if Coinbase can't turn a profit and is forced to sell to *potentially* incumbent TradFi firms.

  • However, time is running out. In 2021, Coinbase paid $820.6M in stock-based compensation. The number is expected to hit $1.5B in 2022. As COIN price drops, it will be harder for Coinbase to compete for talent, creating a negative incentive flywheel for its employees.

For builders: Pay attention to what the crypto conglomerates are building. Open source is a double-edged sword. Big players can easily replicate your work. Whether you're building to get acquired or not, navigating product-market fit against large players with unlimited resources is critical in a bear market. You can't always raise more funds.

For investors: The market can stay irrational longer than you stay solvent. When the FED turned the money printer off, things can get rather ludicrous. A few months back, many were championing COIN as undervalued. If you have huge ammunition, then go ahead and make your move. If you don't, you might be stuck catching a falling knife.

CASE STUDY

VISA Crypto Auto Payments

State of play: Visa published a thought leadership post advocating for crypto auto payments for self-custodial wallets. The idea came from Visa's internal crypto hackathon. It's inspired by the need to create crypto products that support real use cases. The company proposes a system known as "account abstraction", with a plan to deploy it on the Ethereum layer 2 network StarkNet.

  • Visa proposes creating a smart contract that acts as a middleman between users and contract accounts, enabling automatic recurring payments without active participation from the users. This will make crypto payments one step closer to the current credit-card system 💱

Between the lines: Critics argued that Visa is trying to reinvent the wheel without learning about Ethereum's history.

  • @FrancescoRenziA stated that the idea will still ultimately require intermediaries and that Visa has the incentive to become one.

  • @charliemktplace stated that Visa's process is overly complicated and shouldn't require account abstraction.

For builders: Always have a technical founder. When you're building a product that touches the blockchain directly, it's paramount to understand every detail of how the chain operates. If your crypto product is tech-first (not brand, media, etc.), don't use third-party vendors to bootstrap your MVP.

For investors: Pay attention to which companies can be easily squandered by incumbents. Web 2 VC firms that allocated capital to BNPL unicorns are now in tears after Apple Pay released its BNPL feature. Don't repeat the same mistakes in crypto. Codes are replicable. Find a unique edge before you invest in that company or project 💡

FEATURES & GOVERNANCE UPDATE

Uniswap FIAT Integration

Uniswap announced a new feature that allows users to purchase crypto using FIAT. The options include credit/debit cards and bank transfers, made available by MoonPay. The feature is only available on Uniswap's web app 🦄

Why it matters: Uniswap is the largest DEX by trading volume. Amidst the ongoing skepticism toward centralized exchanges, decentralized alternatives have the opportunity to gain market share. The features will be made available for 160+ countries, making it a powerful feature for countries with weakening currencies against the US Dollar.

Other notable feature updates:

QUICK BITES

  • Coinbase stock hit all-time low.

  • Binance US to buy Voyager's assets for $1.02B.

  • Grayscale may try a tender offer.

  • Visa proposes StarkNet adoption.

  • SBF signs extradition papers.

  • Polygon launches web3 startup accelerator.

  • BlockFi seeks to reopen withdrawals.

  • BitDAO considers $100M token buyback.

  • Binance joins US lobby group executive committee.

  • Binance acquires Indonesian-exchange Tokocrypto.

  • QuadrigaCX addresses moved funds.

MEME & NOTEWORTHY READS

  • Brian Armstrong's blog on crypto regulation.

  • DLNews' article on Andre Cronje's legacy.

  • Forbes' story on Wintermute.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.