One of the more intriguing crypto-related companies is Coinbase (NASDAQ: COIN). A company that’s inherently tied to crypto markets, but moves independently, could see a surge in interest from new opportunities. On the Jan. 5 episode of “The Crypto Show” on Backstage Pass, The Motley Fool’s Eric Bleeker and Fool.com contributor Chris MacDonald discuss one potential catalyst for Coinbase.
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Eric Bleeker: “The race is on to be the App Store for crypto, a major lesson of Web 2.0 was that consumers love platforms. I don’t think that’s going to change for Web 3.0. Currently, there is no crypto platform that owns the customer relationship and aggregates suppliers. I predict that in 2022 many companies will race to build this platform with Coinbase in the lead as it integrates DeFi and NFTs.”
Now, Chris, part of why I wanted to put this in is, there is somewhat of a duality in crypto that is built on the idea of decentralization and you look at Web 3, taking that to a whole new degree, so to say that a platform, is in many ways the most valuable idea of this can seem a little incongruous. And yet, you do look at an opportunity with Coinbase here. We noted when they had first announced their NFT platform, the kind of interest that was in it precisely because of what we just talked about, which was, people need trust in these markets, and while there is some level of first adopters that tend to drive initial narratives, you see in that next wave a lot of people looking for a level of simplicity.
My question here, I have personally held off on buying Coinbase in part because I feel like I already have exposure to the same things that drive that stock, and you just look at its past history and how closely it aligns with price movements and specifically Bitcoin. Could there be something bigger here that investors are missing in the future where Coinbase potentially has an opportunity to be a lot larger platform because a lot of people only focus on the risk factors of them losing fees for trading? Is there another side that they could become a dominant feature in things like DeFi and NFTs that investors are simply overlooking today?
Chris MacDonald: I think that is a very interesting thing to think about, Eric. The level of centralization that’s needed to get things done.
Even going back to the LinksDAO conversation that we just had, one thing that we didn’t talk about was the idea that in order to actually buy a golf course, they would need to set up a company which is inherently centralized. Maybe the DAO, the voting structure is decentralized and maybe you can invest via cryptocurrency, which is decentralized. But ultimately, at some point, a centralized entity needs to be in place in order for some real-world progress to happen.
Coinbase is interesting and that obviously it’s a publicly-traded company, there’s a CEO. A lot of innovation is happening right now via companies in the crypto space that are centralizing and organizing to achieve a goal. In some senses when you think about decentralization, it’s a good thing because everyone has a say. It’s truly democratic.
But at some point, this goes back to the messy comment from the previous slide. There can be a lack of focus or a lack of structure, and sometimes that structure is a good thing. That is an interesting argument for Coinbase.
Personally, I don’t own it for some of the risks that you highlighted there relating to trading fees and margins and stuff like that, fundamentals. But that being said, this idea that Coinbase could be a leader in building a platform that aggregates suppliers and builds the platform that’s necessary to create a lot of the change that people hoped for in a decentralized way. But being that centralized entity to do it.
It’s a very deep discussion. We can probably talk about that for an hour, but it’s somewhat of a paradox right now in the crypto world because in some ways that lack of focus that decentralized entities can bring. There’s good and bad to both and I think people and investors are starting to see that.
Bleeker: Yeah, duality paradox it can be a lot to wrap your head around.
Chris MacDonald has no position in any of the stocks mentioned. Eric Bleeker owns Bitcoin. The Motley Fool owns and recommends Bitcoin and Coinbase Global, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.