On January 11, Brian Armstrong, Co-Founder and CEO of Coinbase, spoke on CNBC’s “Squawk Box” about the significance of the SEC’s recent approval of several spot Bitcoin ETFs.
Crypto Industry Recognized
Armstrong considers the SEC’s approval a game-changer for the crypto industry, indicating government acceptance of cryptocurrencies as a legitimate asset class.
Coinbase’s BTC Custodian Role
Coinbase is the custodian for 10 of the approved Bitcoin ETFs. Armstrong believes this will bring in new capital pools into Bitcoin.
Advantages for Coinbase
Not only does being custodian for the ETFs generate revenue, but it also caters to customers seeking diverse crypto asset uses beyond Bitcoin.
Wider Investor Access
Armstrong thinks this opens the door for investors who lacked a straightforward way to gain crypto exposure.
Future Opportunities for Crypto ETFs
The approval of Bitcoin ETFs could pave the way for other cryptocurrencies to have spot ETFs and development of index funds for crypto assets.
SEC’s Approval
Armstrong observed the SEC’s approval seemed reluctant, influenced possibly by legal pressures.
Regulatory Engagement
Despite challenges, Armstrong commits to fostering a regulated and trusted crypto industry in the U.S.
Positive Market Outlook
He avoids focusing on short-term market movements, remaining optimistic about the influx of new capital.
Historical Significance
Armstrong compared this milestone to other significant moments in crypto history, speculating on future developments like central banks holding Bitcoin.
Dan Dolev appeared on CNBC to analyze the consequences of the introduction of spot Bitcoin ETFs, with a focus on Coinbase and the overall crypto market.
Dolev shared a somewhat skeptical perspective on the effect of these ETFs on Coinbase. He pointed out that, contrary to what might be assumed, the ETFs present a substantial challenge for Coinbase. He elaborated that by serving as a custodian for these ETFs, Coinbase is essentially eating into its most lucrative segment – direct Bitcoin trading.
Dolev underscored that as a custodian, Coinbase’s fee earnings would be markedly lower compared to the substantially higher fees it charges for direct Bitcoin trading. This represents a shift from a highly profitable model to one that is considerably less so.
Dolev then explored the wider impact on the cryptocurrency market. He proposed that the introduction of spot Bitcoin ETFs signifies a major shift in Bitcoin trading’s pricing dynamics. He foresaw a notable reduction in trading prices, a trend he believes began with the ETFs’ introduction. This reduction, he argued, stems from heightened competition and more market alternatives, diminishing Coinbase’s capacity to levy higher fees.
In discussing Bitcoin trading costs, Dolev noted that Coinbase had been able to impose high fees as it was among the few trusted trading platforms in the U.S. However, with the advent of spot Bitcoin ETFs and other trading venues, he expects Coinbase’s ability to sustain such high fees will diminish.
Regarding the behavior of Bitcoin enthusiasts or long-term investors, Dolev remarked that Coinbase profits primarily from active trading. If users opt to hold their Bitcoin without engaging in trading, Coinbase doesn’t earn from these holdings. He suggested that this trend of holding without trading might become more prevalent, further affecting Coinbase’s revenue.
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