Picks & Shovels on Nasdaq, Piping for Banks

April 15, 2021

Welcome to the April edition of Crypto: Decrypted.  As bitcoin continues its historic run with new highs (again!) the markets were all in a tizzy yesterday over the Coinbase IPO.  Let’s jump right in.

Crypto on Nasdaq

 It was bound to happen and, sure enough, it’s happened.  You can now participate in the crypto markets – indirectly mind you but participate nonetheless – on Nasdaq.  No, you can’t buy bitcoin directly, but with its historic listing, Coinbase is making waves and allowing people to invest in the picks and shovels that many use to trade crypto assets.

With reference prices originally projected at $250, then $375, the Crypto juggernaut opened at $381 and rose as high as $429 before ending the day at $328. Where will it go? We’ll have to see. No matter what, it goes without saying that this has ushered in a new era as Coinbase’s market cap crested $100 billion, which is in the same category as companies like Target and CVS. Impressive indeed.

I’m not going to spend a lot of time on this direct listing because, frankly, there seems to be news of it everywhere and there will be for days.  I do, however, want to note it as a milestone and comment that many pundits are stating it is a major step for market credibility.  The New York Times has listed it as a coming out party and Entrepreneur magazine has stated in their review of the IPO that it “legitimizes the industry.”  Obviously, we’ve felt it’s been legitimate for a while and have been waiting for the general market sentiment to catch up.  Seems like it’s doing just that.

Bloomberg Said What?

While everyone’s eyes have been on Coinbase, Bloomberg quietly came out with a crypto report on April 6th.  This report is incredibly bullish stating that bitcoin as a reserve asset seems to be more attractive than gold and give a price analysis pointing to $400,000 bitcoin price by the end of this year.  They base this projection on analysis of the 2013 and 2017 markets, but also combine this data with other factors including market sentiment, investor behavior and lower (relative) volatility.

This is Bloomberg folks, so it’s surprising to many that they would make such a statement, but they did. Importantly, this is quite different then their October 2020 report which predicted $100,000 bitcoin by 2025. This is interesting enough that I’m going to provide a few sources for your review depending on how far you want to dive down this rabbit holeYou can hear a 15-minute podcast review, read a Nasdaq published summary or, for those who want to go straight to the source, review the actual report here.

Just a year ago bitcoin was at $5,000 and such predictions were scoffed at.  Now a predication of $100K bitcoin seems conservative.

Practical Payment with Crypto 

Bitcoin always gets the limelight, so I have one more notable that you may have missed. There’s nothing quite like getting paid and English premier league club Southampton now allows certain performance based bonuses to be paid to their players in bitcoin.  I suspect it’s not long before this becomes a trend.

Ok, now let’s move on from the granddaddy of crypto; the rest of the crypto world is also up to big things. Visa noted that it would allow payment settlements using cryptocurrency stablecoin USDC, which is pegged to the US Dollar, bringing crypto to the institutional level.  This means that banks are truly investing in blockchain technology as an operational vehicle and is could well be bigger news than Coinbase’s direct listing because it positions crypto to perhaps be the new plumbing that will have the world of finance function.

Following up to that State Street, the second oldest bank in the US with $3.1 Trillion assets under management, is evaluating a bank-grade trading platform for crypto assets that could to go live this year, again showing old-guard bank enthusiasm.

Meanwhile in the “boring but important” category, U.S. Securities and Exchange Commissioner Hester Peirce stated “Governments Would Be Foolish to Try to Ban Bitcoin” and that it would be akin to shutting down the internet. Now, we expect this from Ms. Peirce as she’s affectionately known as “Crypto Mom”, however enthusiastic support in the highest circles of government is always a good thing.

Last but not least, we know that foundational underpinnings create future success. This is true when building a house or building a business.  Apparently a number of big banks see the same thing in the world of blockchain and that is a need for strong infrastructure, because Mastercard, UBS and JPMorgan participated in a $65M fundraising round for the Ethereum Development Organization ConsenSys.   Ethereum (as you probably know) is a smart contract platform and one of the layers of “infrastructure” upon which the next next generation of blockchain applications will be built.  Currently, it’s fueling the non-fungible token (NFT) craze, which we touched on last blog, and it is also the Decentralized Finance (DeFi) space. Ultimately, time will tell how they do, but this is a huge vote of confidence not just in Ethereum, but in the future of blockchain itself.

In Closing

I try not to make these overlong so, rather than jump into an educational segment, I’m going to stop here and let this simply be a newsy blog.  This time Coinbase and Bloomberg stole the show and rightfully so. While that’s all bright, shiny and commands attention I encourage all to keep your eyes on the quiet day-to-day footsteps that are happening as every week new infrastructure is being proposed, piloted and implemented.  These are the items that, with little fanfare, will be the foundational layer of the next decade(s) as we enter the blockchain empowered Age of Autonomy.

Until next time, be well, stay safe, and, of course, we’ll continue to Decrypt: Crypto for you!

About the author James Diorio

James is the principal and chief executive officer of Tradecraft Capital.