Here’s the tl;dr from my thoughts on Coinbase:
- Buying Coinbase represents buying a stake in the ever-growing cryptoeconomy
- Investing in Coinbase can be similar to buying a crypto index fund, e.g. getting exposure to a basket of cryptocurrencies beyond Bitcoin and Ethereum
- Competition will drive down transaction fee revenue; companies like Coinbase will have to differentiate. Luckily, Coinbase operates in a huge addressable market and can offer new crypto versions of any financial service
- The valuation of Coinbase might be a bit rich out the gate. If Coinbase starts out as high as $100B in market cap, I don’t have high conviction that the stock could 10x.
I’ll ultimately buy Coinbase when it IPOs, but will limit my purchase if the price feels too rich for my taste.
If you’re looking for great financial analysis you’re not going to find it here. What I hope you’ll be left with is a unique perspective on an incredibly interesting company that’s going to IPO—Coinbase.
1️⃣ What’s in a one pager?
If you’ve never seen a one pager (I’m new to this too), check out billionaire Chamath Palihapitiya’s 1 pagers on Latch, Pipe, and Metromile.
In his explanation of what 1-pagers should accomplish, Chamath says…
“…To capture saliently the few things that matter.”
I almost psyched myself out of writing a stock analysis. What depth could I possibly bring that financial analysts and pundits haven’t already explored?
I decided that it should serve at least an audience of one—me.
Since I’m not a financial analyst, I figured I’d put together my analysis like a thought experiment. It’s like an exercise in convincing myself whether to invest or not, and a process I hope to apply to every single investment.
If you found this helpful or have feedback, just hit reply with the words “Stock analysis”
💬 QUOTE OF THE WEEK
“I do think some digital currency will end up being the reserve currency of the world. I see a path where that’s going to happen.“— Brian Armstrong, Coinbase CEO
💼 Portfolio updates
The only move I made recently is to increase my weekly buys of Bitcoin and Ethereum. Here’s what I’m contemplating next:
- Getting out of bonds entirely… Bonds have long been part of my retirement accounts, but I might reallocate after reading Ray Dalio’s piece “Why in the world would you own bonds?” How are you thinking of bonds these days?
- Dividend and REIT Stocks: I’m considering replacing bonds with dividend and REIT stocks. This may also buffer against the rotation out of tech stocks.
Note: It’s pretty incredible that Ray Dalio, who popularized the “All Weather Portfolio” which has in the past recommended allocating 25% to bonds, is now getting out of bonds completely. Whenever long term investors like Dalio change their minds, I listen.
💸 Money Tip of the Week: Earn free crypto by learning about it (really)
The fastest on-ramp to the crypto world is just to get paid learning about it. First, you can get $10 in free BTC by joining Coinbase with my link. Then, go to coinbase.com/earn and you’ll see a variety of cryptocurrencies that pay out rewards for learning about them.
All this requires is spending a couple minutes looking at explainer carousels, then taking a quiz at the end.
It’s a pretty neat way to not only get started with crypto, but learn about new tokens & projects in the cryptoeconomy.
If you still haven’t dipped your toes into crypto yet, then today’s newsletter (and one pager) might have convinced you to at least start a Coinbase account. Reply to me if you have any questions.