Coinbase has claimed it currently has over $90 billion in cryptocurrencies on its website in a recently released year-end report.
The paper, which is targeted at institutional customers of Coinbase, was published on Friday afternoon and aims to explain the role of the business in the larger crypto ecosystem.
Topics involve the status of Bitcoin in 2020, as well as Ethereum, DeFi, blockchain control, and cryptodollars, otherwise referred to as stablecoins.
Coinbase Institutional Investor Trends
Due to a number of factors, including its status as a store of value, as an inflation buffer and/or protection against new prospective monetary policy uncertainties, as a portfolio diversification instrument and as a treasury reserve asset, Coinbase’s institutional clients invested in Bitcoin in 2020.
In 2020, Bitcoin’s price moved dramatically higher. The BTC/USD pair broke out of its post-2017 trading range and finished the year at $29,185, attaining a 321 percent return since January 1, telling many investors that it is here for the long term.
A combination of 1) its emerging capacity as a store of value, and 2) its position as a digital asset that is needed to fuel transactions on its network, is the argument for owning Ethereum that Coinbase hears most often from customers.
Although Coinbase’s institutional customers primarily purchased Bitcoin in 2020, Ethereum, the second largest crypto asset by market capitalization, also took an increasing number of positions. In 2020, Ethereum traded well against USD, outpacing Bitcoin to close the year at $745 by 487 percent.
Coinbase noted that “cryptodollars” in 2020 have started to rise. With Tether’s market capitalization expanding by 350 percent from $4.75 billion to $21.4 billion (including its Ethereum, Omni, and Tron formats) and USDC increasing by 655 percent from $518 million to $3.91 billion, Tether and USDC remained the leading properties.
Trends in Crypto Regulation
Crypto’s legislative environment continues to grow, according to Coinbase. In 2020, the market saw intensified action, particularly from federal US regulators, including the Office of the Comptroller of the Currency (OCC) of the Treasury Department and the Financial Criminals Compliance Network (FinCEN), the U.S. The Securities and Exchange Commission (SEC), the Trading Commission for Commodity Futures (CFTC), and the U.S. Justice Department (DOJ).
Although the responses of institutional market players to specific legislation remain mixed, the sector largely welcomed changes to more detailed rules in 2020 for how crypto firms can act lawfully and reasonably.
Coinbase and others now provide the crypto markets for institutional customers with stable, managed onramps. Through clarifying the legitimacy of different acts and the standing of individual properties, additional administrative guidance carry this trust a step further.
Coinbase states that it has not yet seen substantial interest in DeFi assets from institutional customers beyond a small community of venture capital funds and family offices in 2020, this portion of the crypto asset class remains predominantly retail-driven.
The Future of Crypto
Reliable and compliant resources for accessing DeFi protocols are challenging to locate, as in the early days of Bitcoin acceptance, and maturity can take time (most DeFi protocols are less than two years old).
However, it is realistic to plan to construct stable “bridges” to DeFi in the coming years, considering the wide market potential to reinvent financial services through accessible, open source DeFi markets.
The report also outlines the partnership between Coinbase and many major institutional customers, such as MicroStrategy and One River Funds. Microstrategy, headed by Bitcoin evangelist Michael Saylor, has acquired a massive $2.3 billion of 70,784 bitcoins in transactions brokered by Coinbase.
This past fall, the major expenditure of Microstrategy may have played a role in the Bitcoin bull market; other major financial players such as Square and PayPal have confirmed support for crypto in their payment offerings since the company’s first purchase in August.