Throwback! Coinbase CEO Brian Armstrong from 2017
Intro/ Context
Coinbase went public today (April 14th, 2021) via direct listing!
On their first day of trading, they briefly topped a $100B market cap, before closing the day around $86B
- Coinbase is the world’s leading cryptocurrency exchange platform
- They currently store over $200 billion of crypto, which is ~11% of all the crypto in the world (according to TheStreet & CNBC)
On November 16th, 2017, Jason interviewed Coinbase CEO Brian Armstrong on a panel that included Tim Draper at the DFJ Summit 2017
- NOTE: This was near the peak of the ICO craze
More context:
- Bitcoin price on November 16th, 2017: $7,924, ~$150 billion market cap
- Bitcoin price today (April 14th, 2021): $62,775, ~$1.17 trillion market cap
- Bitcoin’s current market cap is about 8x larger than what it was during this interview
- After a brief pullback at the start of the pandemic, Bitcoin has gone 11X from ~$5,500 to its current price of over $60K
- via CoinDesk
Top Insights
During this 2017 interview, Coinbase CEO Brian Armstrong showed incredible foresight on the following topics:
- The ICO bubble they were in was out of control, and Brian anticipated SEC involvement and a crypto correction
- Coinbase was operating in a highly regulated space (crypto to fiat conversion), which helped them stand out as a trusted exchange because users could not be anonymous
- Bitcoin’s market cap made it much less prone to manipulation than other cryptocurrencies
- Ethereum’s advantage as a scalable transactional currency over Bitcoin, because of the price associated with trading BTC
Dangers of the 2017 ICO bubble
“… I do think the ICO craze is exactly that. It’s a craze, it’s a bubble, and it’s a little out of control right now. I would not be surprised in the next 6-12 months if there is some enforcement action by the SEC, some of these (ICOs) get slapped pretty hard, and there is a bit of a correction in the industry.” – Brian Armstrong in Nov. 2017
- This quote proved prescient, as only weeks later on December 4th, 2017, the SEC’s newly formed “Cyber Unit” filed its first charges against ICO scam PlexCoin
- Armstrong also spoke about how the underlying trend of ICOs was real and positive:
- A lot of people can’t raise money easily for their business and global crowdfunding could help resolve some of that
Operating in a heavily regulated environment
“In any two month period, we have some auditor on site from some regulator coming to check us out. So, one of the requirements of that is that we do know our customer, and so people are not anonymous on Coinbase.” – Brian Armstrong in Nov. 2017
- Taking the necessary security steps to operate in a heavily regulated environment (crypto to fiat exchange) likely led to Coinbase developing a level of trust with its users, which was a crucial differentiator in the early days of crypto going mainstream
- They currently have over 1 million reviews at 4.7 stars on Apple’s App Store
- Armstrong also mentioned the crypto to crypto exchange industry being a more unregulated, speculative area “… where the ICOs live.”
Bitcoin manipulation (or lack thereof)
“… Bitcoin is so big now, you know, it’s well over a $100 billion-dollar market cap, so there is fewer and fewer people who can try and move the whole market…” – Brian Armstrong in Nov. 2017
- At the time, Bitcoin had a ~$150B market cap and around 10% of the early mined Bitcoin was locked up
- the benefit of the blockchain is that you could see if those early Bitcoins move – which would set off warnings of potential manipulation
- as of January 2021, around 20% of all 18.5 million Bitcoins appeared to have been lost or stranded in wallets
- Brian also argued that due to the sheer size of the market cap, Bitcoin could not be as easily manipulated as other cryptocurrencies
Ethereum’s potential as a scalable transactional currency
“I think Bitcoin was my first true love… but it did break my heart a little bit.” – Brian Armstrong in Nov. 2017
- Brian’s hope for Bitcoin was that it would spearhead the world’s first open financial system, where all payments were fast, cheap, and instant
- However, Bitcoin ended up not scaling to that level due to the high cost of transactions
- which has turned Bitcoin into a “digital gold” rather than a usable currency
- According to Brian, Ethereum’s roadmap at the time was better than Bitcoin’s, and there were already twice as many Ethereum transactions as Bitcoin transactions
- Recently, that gap has widened:
- According to Hedgeweek, in Q3 2020 Ethereum transactions outpaced Bitcoin by 3.5x
- Ethereum has become the standard currency for storing and trading NFTs
Betting on the price of Bitcoin in 2027
And the end of the interview, Jason asked Brian to make a friendly wager on the price of one Bitcoin 10 years from the day (2017 to 2027). Brian set a price of $100,000 and Jason took the under. Bitcoin is currently trading over $62,000.
BA: “$100,000 Bitcoin.”
JC: “$100,000 Bitcoin?”
BA: “Yeah.”
JC: “I’ll take the under!”