Coinbase will buy $500 million in crypto assets and dedicate 10% of quarterly income to a crypto asset portfolio according to late Thursday announcements.
It wants Ethereum, Proof of Stake assets, and DeFi tokens to become the first publicly traded crypto asset investor.
In a previous tweet, CEO Brian Armstrong stated that the firm anticipates expanding as the market matures. He also stated the company’s desire to diversify its crypto-related services and operations beyond trading.
“We’re hoping to do more business in crypto,” Armstrong tweeted. “It’s still a mix.”
Bitcoin’s price rose on the news, passing $47,000 on Friday after two days below $45,000 Coinbase’s stock gained over 3% in pre-market trading on Friday.
Microstrategy and Tesla (with Coinbase’s support) are among the few corporations that retain bitcoin to hedge against inflation and probable dollar devaluation. On Thursday, Citi reviewed Microstrategy’s rating, suspending its price target and projections due to its bitcoin investment and price correlation.
After buying $50 million in gold to supposedly hedge against black swan events, Palantir published quarterly results last week. Palantir also said it accepts bitcoin payments from customers, but none had done so.
Bitcoin’s Price and Volality
However, analysts are patient about the stock’s correlation to bitcoin’s price and volatility, and hopeful about Coinbase’s aspirations to spur long-term innovation throughout the financial system.
The investments will be made “over a multi-year window utilizing a dollar cost averaging strategy,” according to Haas. “We only dispose under certain situations, such as an asset delisted from our marketplace,” she noted.
According to Oppenheimer’s Owen Lau, the new investing policy will not “materially” reduce the Coinbase-Bitcoin correlation. According to him, integrating cryptocurrencies into daily operations like paying vendors and workers can “further facilitate and influence both retail and institutional adoption”.
Coinbase has reportedly amassed $4 billion in reserves to weather regulatory storms, according to the Wall Street Journal. Despite the deal, the company has plenty of cash on hand, Lau said.
This includes international presence and subscription-based business, he added.