The Coinbase model: profit from the crypto assets it lists
FT analysis shows how one of the world’s biggest cryptocurrency exchanges blurs the division between market-maker and investor
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https://www.ft.com/content/4e15d5b6-033b-4294-8aba-d95e02f51b3b
In December, a cryptocurrency issued by the social networking start-up Decentralized Social soared in value after Coinbase allowed it to begin trading on the company’s exchange.
The listing provided a jolt to the start-up’s fortunes, with its token price briefly doubling to a high of $187. It also boosted the fortunes of another key partner, Coinbase, which had backed the start-up as part of a $200m round of funding announced three months earlier.
DESO, as the token is known, is one of at least 20 cryptocurrencies that Coinbase has listed for trading while holding an investment in a related project, according to a Financial Times analysis of the company’s disclosures, PitchBook data and public announcements.
The findings show that, of those 20 projects, Coinbase listed only 12 as holdings on the website of its in-house investments arm, Coinbase Ventures, as recently as this week.
Andreessen Horowitz, one of Silicon Valley’s leading venture capital groups, is an early investor in Coinbase and holds a seat on the company’s board. The VC firm has also invested in at least a dozen projects whose tokens later gained approval to trade on Coinbase.
The analysis shows how freewheeling cryptocurrency exchanges blur divisions that are more strictly enforced in traditional capital markets. Coinbase is the largest cryptocurrency exchange in the US, making it a key player in the past year’s boom in digital asset trading, with more than 7m monthly transacting users.