Is it worth that much?
Japan has lost its economic growth for last two decades. During the long recovery time, the rising Sun in the pacific didn’t surface from the turbulent ocean. But the continent China expanded its economic success three-holds of Japan in GDP. The Asian growth has been backed by the global manufacturing site in China with GDP reaching $14trn and still growing. Japan stagnated at $5.4trn. The Covid-19 lockdown impedes the progress by 10%. What is amazing is the Japanese start-up finance kept itself at mere $4.6bn, according to a start-up research publication.
On April 10th, The Economist illustrated the prospects of Coinbase, a marketplace for digital money. Before the floatation on Nasdaq, Coinbase looked at a whopping $100bn in initial valuation, similar or more expected than the record-breaking listing of Facebook with $104bn in 2012. As of May, the value of Coinbase reached $86bn, a bit lower than excessive capitalization in Wall Street.
The magazine covers basic information of crypto platform, describing a very brief revenues and profits. The firm grew to $1.8bn in revenue for the last quarter of 2020, up from $585m in the same period of the previous year. The year-on-year quarterly gain in profits have risen from $179m to an estimated $730 to $800m. The platform held $225bn in its accounts, more than a tenth of cryptoeconomy. In one quarter alone, cryptocurrency purists traded $335bn worth of currencies.
The British newspaper sketches an episode by delving the debate on prospects with typical three dimensions; business model, organization, and competitions. For a start, it centers on the revenue model. The platform is basically transaction fees on the exchange in the digital marketplace. Coinbase charged 0.5% in fees out of $335bn in the first quarter of 2021, generating 96% of the revenue in 2020. The growth prospect of the firm is aligned with that of the cryptoeconomy in the world. It aims at the “open financial system of the world.”
The second and third dimensions of the discussion focuse on management and organizational structure. Brian Armstrong, a boss of Coinbase, is a young and tech leader. A 38-year-old Texan with $16bn worth of personal assets takes on a financial behemoth. The key is structure of his management. A paper argues that a successful firm grows with decisive leader in the decentralized format. It ascertains some cases in the past.
A journalist, Jeff John Roberts, writes in his book, “Kings of Crypto” that Mr. Armstrong as a self-described introvert. The company’s history depicts a delayed decisions and infighting since its founding in 2012. (To me, it is mostly a miracle that a firm with less than ten years attracts investors to set $86bn in valuation in New York. )
With abundant venture capital flowing from $21trn GDP, nearly four-folds of Japan’s, U.S. may see another tech tycoon in the near future. For investors in Nasdaq, the answer to the question, “Is it worth that much?”, comes with the rise in share price of Coinbase. From the perspective of a writer in Tokyo in a stagnant country, it is impossible to answer it. With personal assets of Elon Musk and Jeff Bezos combined, my quick guesswork shows two entrepreneurs reached 7% of Japan’s GDP. When Mr. Armstrong joins the club, the market will be boosting his cryptoassets.