Follow the trend or stick to the original intention? The choice and answer of Coinbase CEO

In late spring in April, a piece of news dominated the front pages of major news outlets around the world: the token trading platform Coinbase was officially listed on the Nasdaq.

As one of the most influential token trading platforms, Coinbase's listing on the U.S. stock market is a milestone for the entire crypto market.

Despite its grand debut, Coinbase’s stock price has been falling since its listing, and has now fallen to $224.63. Compared with the $429.54 on the first day of listing, Coinbase’s stock price has been cut in half.

All this makes us think: What caused this situation?

When trying to explore the origin and answer of all this, we have to start with Brian Armstrong, a hardworking and smart genius.

Success lies in struggle

Born in the 1980s, Brian grew up in San Jose, California, the "heart of Silicon Valley."

This land of high-tech companies seemed to have the magic of nurturing genius. In high school, Brian was already able to use languages ​​such as Java and CSS for development. In the process of learning and practicing, Brian began to build websites for some stores in the town. At that time, he had never thought that his fate with computer technology would help him become one of the world's top richest people in the future.

After entering university, Brian began to show his amazing talent and strength in computer and finance. He worked in companies such as IBM, Deloitte and Touche, and in his junior year, he and John Nelson co-developed and founded UniversityTutor, a service website that helps teachers and students in school freely choose tutoring or teaching outside the classroom.

This Internet education company founded by Brian and where he served as CEO provided him with a wealth of experience. While starting his own business, he also did not neglect his studies.

In 8 years, Brian earned a bachelor's degree in economics and a master's degree in computer science from Rice University, and also "took time" to work briefly as a software engineer at Airbnb.

In 2009, Satoshi Nakamoto released the Bitcoin white paper. Brian was the first to read this world-changing document and was impressed by the design of Bitcoin. He keenly perceived the huge potential and entrepreneurial space of the crypto market, and found inspiration from the stock trading model. He began to conceive and develop a trading platform with the idea that "people will be able to trade Bitcoin like trading stocks online in the future." The seeds of a legendary birth were planted here.

In 2012, Brian quit his job at UniversityTutor and co-founded Coinbase, a token exchange service platform, with Fred Ehrsam in June of the same year.

Brian Armstrong (right) and Fred Ehrsam (left) founded Coinbase in their San Francisco apartment in 2012

No one knew that Brain Armstrong and Coinbase would become two important names in the crypto world in the future.

Leading by taking every step carefully

If we look back at the development history of Coinbase, it is not difficult to find that this company, whose main business is rooted in the encryption field, has been integrated into the traditional financial market to the greatest extent.

When Coinbase was first established, it was included in the list of Y Combinator startup incubator projects, which is famous for its sharp investment vision. Y Combinator has invested in many companies such as Dropbox, Airbnb, Reddit, Weebly, etc., which shows its vision for selecting startups.

In just 4 months, Coinbase was ready to fully launch into the market, providing users with Bitcoin buying and selling services through bank transfer channels.

In 2013, Coinbase received a $5 million investment from Union Square Ventures (USV); in December of the same year, it received another $25 million in investment from USV, Ribbit Capital and Andreessen Horowitz.

In 2015, Coinbase became the first licensed Bitcoin trading platform in the United States, receiving a $75 million investment from the New York Stock Exchange, Draper Fisher Jurvetson and several banks.

With a lot of investment from the traditional financial market, Coinbase expanded rapidly. According to its public data, as of 2016, Coinbase already had 4.7 million users.

At that time, Coinbase had become one of the world's largest and most influential token trading platforms. However, Brian Armstrong and Coinbase faced a life-or-death decision: should they continue to develop in compliance, or seek to maximize the number of users and profits, and prioritize market expansion when relevant rules are not perfect?

Obviously, Brian chose the former.

• In 2017, Coinbase obtained a BitLicense from the New York State DFS (Department of Financial Services), allowing it to provide token trading services in New York;

• In 2018, Coinbase obtained an e-money license from the UK Financial Conduct Authority, authorizing it to operate payment services and token cash substitute services in 23 EU countries;

• In July of the same year, the U.S. Securities and Exchange Commission approved the company to use token trading and wallet services in the United States.

Coinbase eventually became the most compliant token trading platform in the world. For users, if they can choose, most people would prefer a platform like Coinbase that has a "compliant" endorsement. As a result, the number of Coinbase users and platform transaction volume continued to grow. According to the prospectus, the platform already has more than 43 million retail investors, 7,000 institutional users, and 115,000 ecosystem partners. As of the end of 2020, the transaction volume reached US$193.097 billion. Coinbase has steadily taken the lead in the crypto industry as a leader. With the wealth and prestige brought by Coinbase, Brian Armstrong was listed in the top 500 richest people in the world by Forbes, and is the number one crypto richest person. As for his choice to be compliant at every step in the development of Coinbase, the answer is undoubtedly success.

The struggle between bears and supporters

Coinbase opened at $381 per share. But since then, the stock price has been falling and is currently trading at $224.63.

Coinbase's assets and investments are largely deposited in the crypto market, and the market value of the crypto market and Bitcoin has dropped dramatically, which has directly exacerbated the downward trend of Coinbase's stock price. Therefore, it can be said that the continued downward trend of the external crypto market is the biggest cause of Coinbase's stock price being halved.

The curse of "peak at debut" came true for Coinbase, and also gave rise to a carnival among bears.

The revenue structure is the focus of criticism from most bears. Although Coinbase has developed multiple businesses such as custody, investment, and subscription, its core business is still online trading of tokens, and the fees and storage service fees it collects account for 90% of its revenue.

After all, the industry threshold is not that high, and the higher the profit, the more powerful competitors will be attracted to join. Therefore, in the eyes of bears, Coinbase's stock price will continue to fall.

Many times, the enemy isn’t even outside. According to statistics from the U.S. data analysis website GuruFocus, several Coinbase internal executives, including CEO Brian Armstrong, CFO Alesia Haas, COO Emilie Choi, CAO Jennifer Jones, etc., sold a total of 12.965 million shares in the first two trading days of listing. Based on the average price of $354.1 during the period, the cash amount was close to $4.6 billion (approximately RMB 30 billion).

There are strong enemies outside and "traitors" inside. David Trainer, CEO of investment research firm New Constructs, said Coinbase's stock price may continue to fall, possibly to $100 or even lower.

But Coinbase fans don’t think so. They’re just worried about missing out on Coinbase’s potential, as it has built a fast-growing and profitable business.

Cathie Wood, the "Wood Sister", is the leader. Her Ark Investment ETFs are constantly adding Coinbase stocks. On July 15, Wood bought another 69,172 shares of Coinbase, worth about $15.5 million. ARK's ARKK, ARKW and ARKF all hold a large position in Coinbase.

Supporters have a different view on the high-level selling. They believe that Coinbase adopted a direct listing method and did not conduct an IPO, so it is reasonable and legal for major shareholders to sell their shares at the beginning of the listing. On the contrary, some media chose to report this matter one-sidedly, which vaguely revealed their maliciousness towards the crypto industry.

Regardless, Coinbase's listing has a profound impact on the crypto industry, and Brian Armstrong's name has long been closely tied to Coinbase.

The road to "breaking the circle" is long, and the test of the mainstream world will continue. Under the background of global tightening of policies on the crypto industry, whether the "compliance" chosen by Coinbase is a pass or a curse, only Brian Armstrong standing in the center of the stage knows the taste.