Coinbase Adding Bitcoin, Altcoins to Balance Sheet
Market Musings

Coinbase Adding Bitcoin, Altcoins to Balance Sheet

The top U.S. cryptocurrency exchange plans to spend $500 million plus 10% of future profits in a broad portfolio of digital assets that mirrors its customers’ holdings.

Coinbase Adding Bitcoin, Altcoins to Balance Sheet

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The $500 million Coinbase plans to invest in crypto does not mean it will just be adding Bitcoin to its balance sheet.

The same day that the No. 1 U.S. exchange’s CEO, Brian Armstrong, announced plans to add a half billion dollars — and at least 10% of its profits going forward — into crypto, the top U.S. exchange’s CFO clarified that altcoins will make up a big part of these investments.
On August 19, Armstrong announced on Twitter that Coinbase “recently received board approval” to expand its crypto holdings noted that it will be investing 10% of its profits into cryptocurrencies.

“I expect this percentage to keep growing over time as the cryptoeconomy matures,” he said. “Hopefully over time we can operate more of our business in crypto - today it is still a mix.”

Indeed, that announcement came a day after reports that Coinbase added $4 billion in cash to its treasury to prepare for stricter regulation, cyberattacks, or a second crypto winter.

Following Customers Into Altcoins

In an Aug.19 blog post, Coinbase CFO Alesia Haas expanded on Armstrong’s tweet, saying that the exchange plans “to lead by example and double down on how we can enable crypto adoption and utility.”

In a heavily highlighted section of that blog, Hass added: “This means we will become the first publicly traded company to hold Ethereum, Proof of Stake assets, DeFi tokens, and many other crypto assets supported for trading on our platform.”

That is, she reemphasized, “in addition to Bitcoin, on our balance sheet.”

More than that, Haas said Coinbase’s “customers will drive our investment strategy,” for the $500 million plus 10%. 

The amount and type of altcoins held by its customers will provide Coinbase with an investment map, she added. 

When it went public earlier this year, Coinbase revealed that it held $230 million in Bitcoin and $53 million in Ether in its treasury, as well as $34 million in unspecified altcoins, as of the end of 2020. That’s in addition to nearly $50 million of the USD Coin stablecoin it launched with Circle.

To avoid competing with its own customers, Haas said Coinbase will make its new investments via its over-the-counter (OTC) desk or off of its own exchange.

“We are long term investors and will only divest under select circumstances, such as an asset delisting from our platform,” Haas noted.

Coinbase would like to increase its crypto investments “as the cryptoeconomy matures,” Hass said. “We believe that in the future, more and more companies will hold crypto assets on their balance sheet. We hope by incorporating more crypto assets into our own corporate financial practices, we can take another step towards building a more open cryptoeconomy.