The Ultimate Guide To Investing Via Coinbase

Coinbase is a cryptocurrency exchange that allows users to buy, sell and store cryptocurrencies like Bitcoin and Ethereum. Coinbase went public in 2021, and its shares are traded on the NASDAQ exchange under the ticker symbol COIN.

If you want to invest in Coinbase, you will need to open a brokerage account with a platform that allows you to trade stocks on the NASDAQ exchange. You can then decide how much you want to invest and what type of order you want to place.

Coinbase's financial history

Coinbase Global, Inc. is an American publicly traded company that operates a cryptocurrency exchange platform. It was founded in 2012 by Brian Armstrong, a former Airbnb engineer, and Fred Ehrsam, a former Goldman Sachs trader.

In May 2013, the company received a $5 million Series A investment, followed by a $25 million investment in December of the same year. In 2014, the company grew to one million users and acquired the blockchain explorer service Blockr and the web bookmarking company Kippt. It also partnered with Overstock, Dell, Expedia, Dish Network, and Time Inc., allowing those firms to accept bitcoin payments.

In January 2015, Coinbase received a $75 million investment, and later that month, it launched a U.S.-based bitcoin exchange for professional traders called Coinbase Exchange. In 2016, the company rebranded the Coinbase Exchange as the Global Digital Asset Exchange (GDAX). In 2017, Coinbase obtained BitLicense and was licensed to trade in Ethereum and Litecoin.

In 2018, Coinbase was valued at $8 billion and became the first "bitcoin unicorn". That year, it also formed an early-stage venture fund, Coinbase Ventures, focusing on blockchain- and cryptocurrency-related investments. In 2019, Coinbase acquired the "blockchain intelligence platform" Neutrino for an undisclosed price.

In April 2021, Coinbase reported a nine-fold increase in first-quarter revenue, from $190.6 million in 2020 to $1.8 billion in 2021. This increase was attributed to the rise in the price of Bitcoin. On April 14, 2021, Coinbase became a public company on the Nasdaq exchange via a direct stock listing. It was valued at $47 billion, with shares trading at $250 each.

In May 2022, Coinbase-backed Mara raised $23 million to build an African crypto exchange. However, in June 2022, amid a global downturn in cryptocurrencies, Coinbase announced it would lay off approximately 18% of its workforce. In January 2023, the company announced another round of layoffs, citing the collapse of the FTX exchange and the possibility of "further contagion".

Coinbase has a history of volatile expectations from investors, making it challenging to evaluate the company effectively. Its IPO was highly anticipated as it was the first time a major crypto company had been offered to the public as a traditional stock on Nasdaq.

Coinbase's potential and your investment horizon

Coinbase's potential is closely tied to the growth and development of the cryptocurrency market. As one of the world's leading crypto exchanges, Coinbase benefits from the increasing popularity and adoption of cryptocurrencies. The company's revenue is primarily generated from the fees and commissions charged on trades made on its platform. Therefore, the potential for Coinbase to continue expanding its user base and capturing a significant market share in the crypto exchange space is a crucial aspect of its long-term potential.

In terms of investment horizon, Coinbase presents a unique opportunity for investors to gain exposure to the crypto market without directly investing in cryptocurrencies themselves. Investing in Coinbase stock means that investors are betting on the company's ability to capitalise on the growing crypto industry. This investment horizon is suitable for those who believe in the long-term potential of cryptocurrencies and blockchain technology but want to mitigate the risks associated with the highly volatile crypto market.

Coinbase has a history of volatile expectations from investors, and its stock price has experienced significant fluctuations since its initial public offering (IPO). This volatility can present both risks and opportunities for investors. On the one hand, it allows investors to enter the market during periods of favourable pricing. On the other hand, it also underscores the unpredictable nature of the crypto industry and the potential for rapid shifts in the company's performance.

When evaluating Coinbase's potential and aligning it with your investment horizon, it is essential to consider the regulatory landscape. The regulatory status of the cryptocurrency industry is still evolving, and the actions of regulatory bodies like the Securities and Exchange Commission (SEC) can significantly impact the value of investments in this space. Coinbase, in particular, has faced legal challenges regarding its compliance with securities rules, which is an important consideration for potential investors.

In summary, Coinbase's potential lies in its ability to capitalise on the growing crypto market and establish itself as a leading exchange platform. The investment horizon for Coinbase stock is suited for those seeking exposure to the crypto industry while mitigating the direct risks of investing in cryptocurrencies. However, it is important to approach this investment with a long-term perspective due to the inherent volatility of the industry and the potential impact of regulatory developments.

Choosing a brokerage account

To invest in Coinbase, you will need to open a brokerage account. A broker is a financial service company that provides a trading platform for retail investors to buy and sell stocks online. Here are some key considerations when choosing a brokerage account:

Commissions and Fees

Although many brokers now offer commission-free trading, it is important to understand the fee structure of the broker you choose. Be sure to review and understand the broker's fees before opening an account. Some brokers may charge higher transaction fees, while others may offer commission-free trading.

Trading Platform

Some brokers offer simple and user-friendly trading platforms, which are ideal for beginners. These platforms are often streamlined and easy to navigate. On the other hand, some brokers focus on providing a wide range of educational resources and analysis tools to enhance the trading experience. Consider your level of trading expertise and the features that are important to you before making a decision.

Access to Additional Markets

If you are solely interested in investing in Coinbase stock, any brokerage platform that offers access to the NASDAQ exchange will suffice. However, if you want to diversify your investments and explore other securities such as options contracts, cryptocurrencies, futures contracts, or precious metals, choose a broker that provides access to multiple markets on a single platform. This will allow you to manage all your investments in one place.

Customer Service

Consider the level of customer service and support provided by the broker. Look for a broker with multiple communication channels, such as live chat, phone, and email support. Additionally, research their response times and the overall satisfaction of their clients. This is crucial, as you want to ensure prompt assistance if you encounter any issues with your account or trades.

Security and Regulation

The security of your investments is paramount. Choose a broker that employs robust security measures, such as two-factor authentication and encryption protocols, to protect your account and personal information. Additionally, ensure that the broker is regulated by reputable financial authorities and complies with industry standards to safeguard your funds.

Reviews and Reputation

Research the reputation of the broker by reading reviews from other investors. Consider their experiences with the platform's usability, customer support, and fee structure. You can refer to trusted review websites and seek out feedback from long-term users to gain a well-rounded understanding of the broker's services.

By carefully considering these factors, you can make an informed decision when choosing a brokerage account to invest in Coinbase. Remember to evaluate your investment goals, risk tolerance, and the specific features that align with your trading needs.

Investment strategy and size

Coinbase stock is traded on the NASDAQ exchange under the ticker symbol "COIN". It is important to understand Coinbase's financial history and potential, as well as the future of cryptocurrency, before investing.

Coinbase's revenue is derived from the assets and trades made on its platform, including maker and taker fees, and interest on personal loans. As a cryptocurrency exchange, Coinbase's profits are closely tied to the performance of the cryptocurrency market. Therefore, investors should consider the potential success of Coinbase in relation to the popularity and trading volume of cryptocurrencies.

When deciding on an investment strategy and size, it is crucial to assess your risk tolerance and financial goals. Determine how much of the stock you want to buy and for how long, ensuring that it aligns with your overall diversification plans and investment horizon. Consider whether the anticipated growth of Coinbase meets your short-term or long-term investment objectives.

It is also essential to choose the appropriate order type for your investment strategy. Market orders execute trades immediately at the best available transaction price, while buy limit orders allow you to specify the maximum price you are willing to pay. Stop orders, on the other hand, trigger a buy or sell action once the stock reaches a certain price.

Remember to only invest an amount you are comfortable losing and ensure that your investment aligns with your financial plan and risk tolerance.

Order type

Coinbase offers a variety of order types for investors to choose from. Here is a detailed overview of the different order types available on Coinbase:

Market Order

A market order is a buy or sell order that is executed immediately at the best available market price. Market orders are useful when you want your trade to be executed as quickly as possible. However, market orders may not get you the best price, especially when trading large volumes. Market orders cannot be cancelled as they are filled immediately and may be partially filled at several prices.

Limit Order

A limit order allows you to set a maximum or minimum price for the order to execute. For a buy limit order, you set a maximum price, while for a sell limit order, the order will execute at your limit price or higher. Limit orders are executed in the order they appear on the order book. There is no guarantee that a limit order will be filled, as it depends on market availability.

Stop-Limit Order

A stop-limit order is a type of order that combines a stop price with a limit price. When the asset's price reaches the specified stop price, a limit order is triggered, allowing you to buy or sell at your desired price or better. The stop price is the price that activates the limit order, while the limit price is the maximum or minimum price you are willing to pay or accept for the asset. Stop-limit orders can help traders protect profits and limit losses.

Bracket Order

A bracket order is an advanced order type that allows you to set a predefined "limit price" and "stop price" for an asset. This enables you to place two opposite limit orders in either direction of the price movement. A bracket order helps you manage risk by letting a favourable position continue to run or getting out as soon as possible to mitigate potential losses in volatile markets.

Frequently asked questions