A Beginner's Guide To Investing Money Via Coinbase

Coinbase is a cryptocurrency exchange platform that allows users to buy, sell, and store their crypto coins. It is a popular platform for investors to participate in the growth of the crypto industry. Coinbase charges fees for trading on its platform, and these fees vary depending on factors such as location, payment method, and market conditions. With over 10,000 assets to choose from, Coinbase is a good choice for beginners as it requires little technical knowledge. This paragraph provides an introduction to the topic of investing money in Coinbase, covering its role as a cryptocurrency exchange, its fees, ease of use for beginners, and the range of assets available.

Understand Coinbase's financial history

Coinbase Global, Inc. (COIN) was founded in 2012 and is headquartered in Wilmington, Delaware. It is a publicly traded company that operates a cryptocurrency exchange platform. In 2021, Coinbase went public on the NASDAQ, becoming the first crypto trading company to be listed on a U.S. stock exchange.

Coinbase's early years were marked by rapid growth and expansion. In 2013, the company received a $5 million Series A investment, followed by a $25 million investment in 2014. By 2014, the company had grown to one million users and acquired several companies, including Blockr and Kippt. They also added bitcoin payment processing capabilities to traditional payment companies like Stripe, Braintree, and PayPal.

In 2015, Coinbase received a $75 million investment and launched a U.S.-based bitcoin exchange for professional traders, the Coinbase Exchange. The company continued to expand globally, offering services in Canada and Singapore.

In 2017, Coinbase obtained BitLicense and was licensed to trade in Ethereum and Litecoin by the New York State Department of Financial Services (DFS). However, in the same year, the company faced scrutiny from the U.S. Internal Revenue Service, which ordered them to report users with transactions of at least $20,000 in a year.

In 2018, Coinbase formed an early-stage venture fund, Coinbase Ventures, and made its first investment in Compound Labs. The company also announced its intention to add support for ERC-20 tokens.

In 2019, Coinbase acquired "blockchain intelligence platform" Neutrino, an Italy-based startup, for an undisclosed price. However, this acquisition raised concerns due to the Neutrino founders' connection to the Hacking Team, which has been accused of providing internet surveillance technology to governments with poor human rights records.

In 2020, during the COVID-19 pandemic, Coinbase shifted to a remote-first model and acquired the digital asset trading firm Tagomi. The company also faced internal backlash after CEO Brian Armstrong initially refused to make a statement about Black Lives Matter, later reversing his decision.

In 2021, Coinbase became a public company on the Nasdaq exchange, reporting a nine-fold increase in first-quarter revenue to $1.8 billion. The company's direct stock listing gave it an estimated value of $47 billion, and its shares closed at $328.28 per share on its first day of trading.

In recent years, Coinbase has continued to expand its products and partnerships. In 2022, they launched a partnership with BlackRock, allowing clients to use their Aladdin investment management system to oversee their exposure to Bitcoin and other assets. However, the company has also faced challenges, including a net loss of $1.1 billion in the second quarter of 2022 and layoffs affecting approximately 18% of its workforce.

In January 2023, Coinbase announced further layoffs of around 950 employees, citing the possibility of "further contagion" following the collapse of the FTX exchange. The company has also faced regulatory scrutiny, with the U.S. Securities and Exchange Commission (SEC) threatening to sue over its cryptocurrency lending product, Lend, and later initiating an enforcement action over Coinbase's staking products. Despite these challenges, Coinbase remains a leading cryptocurrency exchange platform, serving millions of users worldwide.

Assess Coinbase's financial reports

As Coinbase is a company that only recently went public, investors will be keen to assess the company's financial reports to understand its worth and how it compares to other companies. This will help determine if the stock price is appropriate for purchase.

Coinbase makes money from the assets and trades made on its platform. It generates revenue from maker and taker fees and interest on personal loans. As a publicly-traded company, Coinbase must file an annual 10-k filing and 10-q quarterly reports. These can be found on the Seeking Alpha website under the SEC filings tab. Investors can also access the income statement, balance sheet, and cash flow statement under the Financials tab.

The annual report provides a comprehensive view of the company's financial health, as does the company's Investor page on its website. These sources include business descriptions, risks, and press releases. When assessing Coinbase's financial reports, investors can compare them to more established companies or other companies at a similar early stage of growth.

Evaluate Coinbase's potential against your investment horizon

To evaluate Coinbase's potential against your investment horizon, you should consider the following:

Understand Coinbase's Financial History:

Go over Coinbase's financial history, including its annual and quarterly reports, income statements, balance sheets, and cash flow statements. This will give you insights into the company's financial health and help you assess its potential.

Assess Coinbase's Financial Reports:

Compare Coinbase's financials with those of more established companies or other companies at a similar growth stage. This will help you understand what the company is worth and how it stacks up against its peers.

Determine if Coinbase's Anticipated Growth Meets Your Investment Time Horizon:

Consider whether the anticipated growth of Coinbase aligns with your investment timeline. The parameters for success may differ depending on whether your time horizon is short or long-term. Evaluate if the stock is expected to have a bullish or bearish trend.

Evaluate Overall Investment Objectives:

After analyzing Coinbase's financials and growth prospects, determine if investing in Coinbase meets your investment objectives. Consider factors such as diversification, investment strategy, and risk tolerance.

Select an Appropriate Investment Strategy:

If you decide to invest in Coinbase, choose an investment strategy that aligns with your goals. Consider factors such as the amount of stock to buy, the investment approach, and your holding period and exit strategy.

Remember that investing in cryptocurrencies and Coinbase carries risks, and it's essential to do your due diligence before making any investment decisions.

Choose a brokerage account

Choosing a Brokerage Account

Coinbase is a cryptocurrency exchange where you can buy popular coins like Bitcoin, Ethereum, and Solana. It is one of the largest and most popular cryptocurrency exchanges in the U.S., with more than 110 million verified users. Coinbase offers a simple and user-friendly platform for beginners, as well as advanced trading options for experienced traders.

When choosing a brokerage account, it is important to consider the range of cryptocurrencies offered, the fees involved, security measures, and customer support.

Coinbase supports over 200 cryptocurrencies, including Bitcoin, Ethereum, Dogecoin, and Ripple. This extensive list makes it a convenient option for most traders. However, more advanced traders may find that they need to set up an account elsewhere, as Coinbase does not support every cryptocurrency available worldwide.

The fees on Coinbase can be complicated and higher than some competitors. They depend on various factors, including account type, transaction size, funding source, payment method, and market conditions. The platform has a confusing combination of spread mark-ups, flat fees, and variable fees. For example, for smaller transactions, you will pay a spread mark-up of 0.5% of your trade value, plus a flat fee ranging from $0.99 for purchases up to $10 to $2.99 for purchases between $10 and $200.

Coinbase offers security measures such as two-factor authentication and cold storage of most customer assets. While these measures provide a level of protection, there have been reports of Coinbase users losing their assets due to hacking and account compromises. Therefore, it is essential to take additional security precautions, such as using a non-custodial or hardware wallet, to protect your investment.

In terms of customer support, Coinbase provides 24/7 live phone support, as well as email and chat options. However, the company has received criticism for its poor customer service, with users reporting slow response times and a lack of urgency in resolving complaints.

Overall, Coinbase is a popular choice for beginners due to its user-friendly interface and wide range of supported cryptocurrencies. However, its high fees and mixed reviews on customer support are important considerations when choosing a brokerage account. It is always a good idea to research multiple options and compare their features, fees, and customer reviews before making a decision.

Decide how much to invest

When deciding how much to invest in Coinbase, it is important to remember that there is inherent risk in investing in any company. It is generally recommended that you only invest an amount that you can afford to lose and avoid investing cash that you may need in the near future. Building in a buffer period will give you time to potentially recover from any short-term drops in the stock price.

Additionally, it is a good idea to fund a long-term, index fund-based investment plan before investing in the stock of a single company, especially one that has recently gone public.

Before investing in Coinbase, it is also crucial to research the future of cryptocurrency and understand Coinbase's role in it. Your investment's potential success is tied to the popularity and trading volume of cryptocurrencies. Ask yourself if you believe there is a future for cryptocurrencies and if Coinbase, as a centralized company, is positioned to capitalize on their popularity.

Lastly, consider the fees associated with trading on Coinbase, which can chip away at your winnings. The fees are calculated based on various factors such as your location, payment method, order size, and market conditions.

Frequently asked questions