This recent IPO will give you an entrée into cryptocurrencies. But be aware, it is a speculative trade and needs to be limited to a small portion of your portfolio.
Coinbase Global, Inc. (COIN)
From Ian Wyatt’s Million Dollar Portfolio
Because we can’t know the direction of the future, it’s difficult if not impossible to predict what cryptocurrencies will wind up most valuable.
Bitcoin and Ethereum are solid bets. Bitcoin, after all, has a market cap over $1 trillion today. For comparison’s sake, the Frankfurt Stock Exchange—containing all the major public German companies—is worth about twice that.
Still, even Bitcoin could wind up getting clobbered a few years down the road if, say, the U.S. Federal Reserve releases a crypto dollar and the markets flocked to that government-backed option. That’s why—as much as I like Bitcoin and Ethereum—today, I want to invest in a sturdier, picks-and-shovels play.
It’s time to buy Coinbase Global, Inc. As the largest platform for buying, selling, and trading cryptocurrencies, Coinbase is a token-agnostic pick that gives us great exposure to the overall crypto market. It has a commanding lead over all other competitors in most every way that counts. Coinbase has more users, more volume, more value exchanged, and greater reach than any other platform out there.
Some analysts worry that, as crypto trading becomes more mainstream, the rich transaction fees that are Coinbase’s bread and butter will fall under competition. That’s true. But it also misses the point. Those analysts are probably the same ones who pooh-poohed Facebook’s IPO, because at the time Facebook was making most of its money from the desktop, while users were moving to phones and tablets.
Not sure if you’ve heard . . . Facebook figured that out. Just as Coinbase is already figuring out plenty of alternate profit centers, beyond transaction fees. In fact, Coinbase is starting to look more like a next-generation bank than anything else.
Today, you can take out loans against your cryptos with Coinbase. You can take out up to 30% of your Bitcoin value—that amount of Bitcoin then gets locked, until you’ve paid your loan back. Interest rates are reasonable—only 8%. And holders of cryptos can benefit—as many cryptos now allow owners to get paid an interest rate, as compensation if and when cryptocurrencies are used as collateral for other loans. Better yet, those loans can take place entirely inside the crypto software. You no longer need banks to act as middlemen.
Though, until consumers are comfortable with that idea, that’s exactly what Coinbase is doing.
Coinbase is about to release a crypto-backed debit card—so you can spend your crypto currencies anywhere Visa is accepted. And, of course, Coinbase offers generous rewards to help grow its user base and get consumers comfortable with trading cryptos.
In fact, you can get $10 in free Bitcoin after you invest your first $100 right here if you’re interested. And you can get free cryptocurrencies at Coinbase, just for going through some short educational lessons and taking a quiz at the end.
What’s more, you can start earning interest on cryptocurrencies today if you so desire. That’s what I’m doing. And at rates that put savings accounts to shame.
Coinbase isn’t sitting back and simply enjoying its pivotal position in the crypto world. The company is actively innovating, and in the process is creating a blueprint for the next-gen financial institutions on the way.
There’s a reason why the JP Morgans and Goldman Sachs of the world are getting nervous and are trying to build up their own crypto divisions. If they aren’t careful, they’ll be left behind by the new economy. And then they’ll get swept away by younger, nimbler competitors, like Coinbase.
Now, cryptocurrencies are a very volatile market. Bitcoin has had numerous bubble inflations and pops over the years, and double-digit swings in a day aren’t rare at all. That’s why we’re going to dip our toes in slowly, and cautiously. We want to slowly build our position up over time, on the theory that sometimes we’ll buy high, sometimes low, but they should average out to good value prices. Known as dollar-cost averaging, this is a solid strategy to use when investing in volatile markets. And that’s why we’re going to use it today. Because you need exposure to the crypto markets. But what you don’t need is to make a purchase at the top of a bubble.
Action to Take: Buy a small stake in Coinbase at market. Every month—or at a frequency you feel comfortable with—add to that stake, until you eventually grow your COIN holdings into a full position. You don’t want to start out investing more than 1% of your total portfolio ($1,000 out of a $100,000 portfolio, for instance), and you shouldn’t go higher than 5% of your overall portfolio once you’ve finished investing via dollar-cost averaging. Hold through the likely volatility.
Ian Wyatt and Ryan Cole, Ian Wyatt’s Million Dollar Portfolio, wyattresearch.com, April 30, 2021