Crypto Surge Eclipses ‘Real’ Economy As Coinbase Readies Earnings

There’s no surer sign of frenzy than when traders bid up prices of imaginary things to eclipse stalwarts of the real economy — the Fords of the world, the Visas, the JPMorgans.

So is the case with cryptocurrencies such as Ether, which, as Coindesk noted, has surged more than 400 percent year to date, touching $4,000 a coin. We note that round numbers tend to be milestones in that they offer at least some “support” — at least in the minds of the people doing the buying.

At this writing, the market cap of that particular crypto stands at about $497 billion. You might think that market cap, in shorthand, is a measure of popularity for a stock, or a digital coin, and thus its (anticipated) business prospects. Visa’s market cap is about $480 billion, JPMorgan’s is just below $480 billion, Ford’s is $45 billion.

There’s an old adage in investing: Price is what you pay, value is what you get. By pushing up the price of the cryptos, speculators are, in effect, betting that alt coins (alternatives to bitcoin) have at least some shot at mainstream adoption, or … perhaps they are simply headed higher because people think they are headed higher.

But, we contend, companies such as JPMorgan and Visa are, arguably, tied more directly into the financial system, and have been debuting products and services that have historically and in the months and years to come will continue to reshape the financial landscape, with stakeholders such as consumers and businesses already firmly entrenched.

Beyond The Volatility

We’ll get a sense of how the crypto economy is evolving when Coinbase reports earnings on Thursday (May 13). The exchange, of course, is a publicly traded way to trade the technological underpinning of crypto itself, where, of course, building the conduits to have buyers and sellers interact is important to expanding familiarity with cryptos in general, setting the stage for them to be used in mainstream commerce. Volume is the key here, as the company makes fees off of each transaction.

In terms of projections, Coinbase has said that it expects to see verified users of 56 million, with monthly transacting users of more than 6 million. Assets of $223 billion, as expected, would represent more than 11 percent of crypto asset market share — and revenues of $1.8 billion, as expected (and which is consensus on the Street), will be the proverbial number to beat. Interestingly, the total top line for all of 2020 stood at $1.3 billion, which gives an indication about how quickly trading has ramped.

But beyond trading, it will be important to hear commentary about using various parts of the digital ecosystem. As has been reported, Coinbase has announced that PayPal is a payment option for its U.S. consumers. The transaction limit, as has been noted, is $25,000 daily, which implies that customers can buy a percentage of bitcoin, or a few Ether — hardly enough to pile “all in” on cryptos, but a way, nonetheless, to marry payments choice to the crypto trade.

As to the road ahead, it may certainly be volatile (crypto volumes and pricing may ebb and flow), but expect Coinbase management to give a hint as to how the exchange may be prepared to weather those bumps.

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