Coinbase, the leading cryptocurrency exchange in the US, has seen its share price soar by 422% since the beginning of the year, as investors flock to gain exposure to the booming crypto market.
The company, which went public in April, reported record revenues and profits in the third quarter, driven by strong trading volumes and user growth. Coinbase now has more than 73 million verified users, up 96% year-over-year, and more than 9.4 million monthly transacting users, up 117% year-over-year.
The impressive performance of Coinbase reflects the growing demand for bitcoin and other digital assets, which have reached new highs in 2021. Bitcoin, the largest cryptocurrency by market capitalization, recently surpassed $60,000 for the first time since April, while Ethereum, the second largest, hit a new all-time high of over $4,800. The total market value of all cryptocurrencies now exceeds $2.8 trillion, according to CoinMarketCap.
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Coinbase is not the only company that is benefiting from the crypto craze. Wall Street firms are also eager to tap into this emerging asset class, which offers high returns and diversification benefits.
Several banks, such as Goldman Sachs, Morgan Stanley, and JPMorgan Chase, have launched or are planning to launch crypto-related products and services for their clients, such as funds, futures, ETFs, and custody solutions. Some traditional asset managers, such as BlackRock, Fidelity, and Vanguard, have also expressed interest or invested in crypto.
The increasing adoption of crypto by institutional investors is a positive sign for the industry, as it indicates a shift in perception and acceptance of this new form of money. However, there are still many challenges and risks that need to be addressed, such as regulatory uncertainty, security breaches, volatility, and environmental concerns.
The cryptocurrency market has been growing at an unprecedented rate in the past years, reaching a total market capitalization of over $2.5 trillion in May 2021. Bitcoin, the largest and most popular cryptocurrency, has seen its price surge from around $10,000 in October 2020 to over $60,000 in April 2021, before experiencing a sharp correction in May and currently trading around $43,700 per BTC.
This phenomenal growth has attracted the attention of many institutional investors, who are looking for ways to gain exposure to this new and exciting asset class. Wall Street, in particular, has been showing a strong interest in bitcoin and other cryptocurrencies, as they offer a number of advantages over traditional assets, such as:
High returns: Cryptocurrencies have outperformed most other asset classes in terms of returns, especially in the long term. For example, bitcoin has delivered an annualized return of over 200% since its inception in 2009, compared to around 10% for the S&P 500 index.
Diversification: Cryptocurrencies have a low correlation with other asset classes, meaning that they can reduce the overall risk and volatility of a portfolio. For example, bitcoin has a correlation of around 0.2 with the S&P 500 index, meaning that they move independently from each other most of the time.
Innovation: Cryptocurrencies are at the forefront of technological innovation, as they are based on blockchain technology, which is a decentralized and distributed ledger that records transactions securely and transparently. Blockchain technology has the potential to disrupt many industries and sectors, such as finance, healthcare, supply chain, and more.
Coinbase and other crypto players will have to navigate these issues and prove their resilience and innovation in order to maintain their growth and competitive edge in the long run.