Everyone in the cryptocurrency community has likely heard the recent news that there is now another addition to the Coinbase family. No, it’s not Ripple (XRP) — regardless of how many in the cryptosphere have been anticipating it — but rather 0x (ZRX). The announcement was made on the official Coinbase Medium account on October 16th and while the cryptocurrency saw a significant jump, it’s nowhere near the likes of some price surges we’ve seen when new cryptocurrencies get added to the well-known platform (I’m looking at you, Bitcoin Cash (BCH)).
In fact, additions in the past have created such price spikes that there is even a term for the phenomenon: The Coinbase Effect. When Bitcoin Cash and Ethereum (ETH) were both first added, the cryptocurrencies experienced an incredible surge in prices. For Bitcoin Cash, trading was actually halted on the platform until the Coinbase team could get things to a more normal level. Due to the high volume and increased volatility of the Bitcoin hard fork coin post-Coinbase listing, things apparently got too hectic for the platform. At one point, Coinbase was reporting Bitcoin Cash trading at over $8,000 where the price on other exchanges like Binance was closer to roughly $3,800. Talk about a great arbitrage opportunity, right?
The Bitcoin Cash addition was happening in the middle of December of 2017 though; fast forward to this week and we see a much different story. Of course, 0x did receive a boost after being added to Coinbase, but nowhere near the proportions we’ve seen in the past. After the Coinbase listing, 0x shot up a good 30% (not too shabby for investors, eh?), but at the risk of sounding cynical, I’d like to mention that it’s not particularly impressive — especially in the cryptocurrency markets where volatility is the name of the game.
The 0x boost was so unimpressive actually, that it’s not even the cryptocurrency that stole the limelight last week. Basic Attention Token (BAT) shot up over 40% in the week with the release of their new version of the Brave Browser. Don’t get me wrong, it’s not that I don’t have respect for what the BAT team is doing with their project (especially knowing the caliber of people working on the project), but to have the release of a new product outperform a major coin listing on Coinbase? That would have been positively absurd had it happened last December.
Now certainly, there is no denying that 2017 was the time for “crypto mania, so it only makes sense that a new listing in today’s market wouldn’t carry as much weight. (At least compared to the current market conditions. For all we know, that may well have been a small blip in the grand scheme of things and the actual true “crypto mania” is yet to come. ‘Calm before the storm,’ anyone?)
After all, cryptocurrency trading volume is down on Coinbase by a staggering 83% compared to December of 2017 and January of 2018, as well as the total market capitalization of cryptocurrencies more broadly. Because of that, it really isn’t terribly surprising to see that there wasn’t such a strong spike in the price of 0x after the listing. However, that does leave some of us wondering what’s in store for the future of Coinbase?
Coinbase has made a name for itself because of its simplicity, regulatory compliance, and ease of use for newcomers to the cryptocurrency world. Yet, as the market continues to expand and more people are introduced to the industry, we’re likely to see a tapering off in the interest for such beginner-friendly platforms, at least in my opinion. After the initial rush of new users in the great crypto bull run of late 2017, there’s only a limited amount of people who aren’t familiar with cryptocurrencies (but are still interested enough to do some learning about the subject and sign up) to benefit the platform in the way that 2017 did.
And, while I have no connection to the platform whatsoever, I believe that’s why the team decided to rebrand Global Digital Asset Exchange (“GDAX”) to “Coinbase Pro.” I think the company likely wanted to bring the branding of their more advanced platform closer to the main app and exchange name (which is really a great sales funnel since you get both the beginners and the intermediate traders when they’re ready to move over to the “big boy” exchange). Whether or not that’s the case, well I really have no idea, but it makes sense to me.
Now onto the future of Coinbase as a platform. What’s their place in the cryptocurrency markets? With 2017 having already passed us by and the majority of the big crypto surge seemingly behind us, will the crisp crypto exchange be able to get by on attracting newcomers to the industry and then moving them over to Coinbase Pro? In addition, the “Coinbase Effect,” as it were, can really only lead to the end of itself.
Indeed, for each new coin added to Coinbase, the net value of the “Coinbase Effect” would, in theory, decrease. As more coins get added to the platform, there are more distractions to bring attention from excited new investors to other coins offered on the exchange. While Bitcoin Cash and Ethereum may have shot up in price almost exponentially after their Coinbase listings, is that really what we should expect to see in the future with other cryptocurrencies?
Personally, I don’t think that’s likely to be the case anymore. Of course, there is always the chance that we see another tremendous bull run take place yet again this year (or the next, or the next, or the next, etc. ad infinitum), but assuming we don’t see another “crypto mania” blowout soon like we underwent last winter, new cryptocurrencies added to Coinbase shouldn’t be expected to blow up like they have in the past.
Instead, the future of Coinbase is beginning to look more and more like a more American-centered version of Binance (with a cleaner more Silicon Valley-esque UI). Going over to the price section on Coinbase, users find themselves staring down a list of the top 50 cryptocurrencies (by market cap) and their prices including not only the 6 currently listed on Coinbase, but the remaining 44 not (currently) offered on the platform as well. Rather than the incredibly short list Coinbase has included in the past of only their offerings, this list leaves one with a feeling of change coming from the exchange.
No longer are the days of Coinbase offering such a low assortment of cryptocurrencies to choose from. Looking forward, we may very well see the exchange offering a plethora of cryptocurrencies for users trade immediately on their phones/computers (with USD pairings) and I think that’s a good thing. Though the additions in the future will probably reduce the “Coinbase Effect” a little more each time a new cryptocurrency is added, I think it’s likely to be an overall net positive for the crypto world. We don’t drastic price swings, we just need more adoption. I’d love to see the day that a newcomer to the industry can create a Coinbase account and purchase BTC, ADA, XMR, NEM, and more all from their phone without any difficulty at all.