Coinbase executives announced late Thursday that the company will acquire $500 million in cryptocurrency on its balance sheet and invest 10% of its quarterly income to a crypto assets portfolio.
The company plans to invest in "Ethereum, Proof of Stake assets, DeFi tokens, and many more crypto assets supported for trade on our platform," making it the first public corporation to do so, finance chief Alesia Haas said in a blog post.
In an earlier tweet, CEO Brian Armstrong outlined the brokerage's objectives, stating he expects the allocation to rise as the market matures. He also mentioned the company's plans to diversify its crypto-related services and operations, which are currently mostly focused on trading.
“Hopefully, over time, we will be able to operate more of our business in crypto,” Armstrong stated on Twitter. “Today, it's still a mix.”
Bitcoin's price increased as a result of the news, passing $47,000 on Friday after being below $45,000 for the previous two days. In early trading on Friday, Coinbase shares were up more than 3%.
Microstrategy and Tesla (with the support of Coinbase) are among the few corporations who have included bitcoin in their holdings as a hedge against inflation and future depreciation of the US dollar. Citi downgraded Microstrategy's rating on Thursday, suspending its price target and estimations owing to the firm's bitcoin investment and price correlation with the digital currency.
Palantir announced quarterly results a week ago, revealing that it had purchased $50 million in actual gold to allegedly hedge against black swan events. Palantir also stated that it accepts bitcoin payments from customers, but that none have done so.
Coinbase reported quarterly profitability and growth numbers that stunned analysts, who are mainly tolerant with the stock's correlation to bitcoin's price and volatility and bullish about the company's intentions to foster long-term innovation throughout the financial system.
The investments will be driven by Haas' custodial crypto accounts and managed "across a multi-year window utilising a dollar cost averaging technique," according to the company. She went on to say that Coinbase is in it for the long haul and that it "would only divest under exceptional circumstances, such as an asset delisting from our platform."
Oppenheimer’s Owen Lau said he doesn’t believe the new investing policy is unlikely to reduce the correlation between Coinbase and bitcoin "materially in the foreseeable future." He views it as a hint that Coinbase may "further promote and influence both retail and institutional adoption" over time by incorporating cryptocurrencies into its own operations, such as paying vendors and workers.
Coinbase reportedly has $4 billion in cash on hand to weather regulatory hurdles, according to a report in the Wall Street Journal this week. Despite the transaction, Lau stated that the company still has enough of cash on hand.
“Share repurchases and dividends look to be off the table for the time being,” he continued, “but we anticipate management will spend surplus money in the business and undertake acquisitions, particularly in international presence and subscription-based business.”
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