News & Analysis

What's the combined value of lunacy and thin air? Over $100 billion say NASDAQ officials!

Andrew Saks, Thursday, 15 April 2021

If ten years ago it had been even assumed that a company that produces absolutely nothing, and operates an exchange that trades absolutely nothing, backed by absolutely nothing, issued by absolutely nobody and takes real, hard sovereign currency in vast amounts in exchange for absolutely nothing, there would be perplexed looks at the very least.

Here we are, however, just over a decade after the bow tie-sporting, Rolex watch-toting cryptocurrency mavericks who launched a rather odd and self-styled assault on what they referred to as 'banksters' - a misuse of the English language so blatant and garish that this in itself should have been enough of a warning to stay away.

I refer, of course, to the astonishing expected value of cryptocurrency exchange Coinbase.

After Binance, Coinbase is the world's second largest digital currency exchange, with over 56 million verified lemmings... er I mean users.

Whilst the white knuckles of the speculators are apparent in the advent of the release of shares onto the NASDAQ exchange for public trading, it is definitely worth considering the hyperbole that has surrounded this recently.

Cryptocurrency has a trail of disaster behind it

A litany of losses, chancers running away with the money of investors wrongly thinking that these would be the next big thing, and government seizures of entire market places and exchanges have dogged the peer to peer rebellion against the establishment, whilst the Tier 1 bank executives sit calmly in their immaculate suits in full knowledge that cryptocurrency will never be any rival for their properly organized reserve currency-backed institutions.

It took a very long time. Long enough for some retail brokers to get themselves involved in trading cryptocurrency CFDs which in some cases cost them tens of millions of dollars in a short time.

Inside information gained three years ago showed losses at two firms - one in Cyprus and one in the UK - of $17 million and $40 million respectively within one week at the end of 2017, one of which was a publicly listed entity which hid this unfortunate scenario by reporting the entire year in one quarter, presumably to avoid shareholder furore.

Then came all the ICO fraud, and inability to withdraw from various ‘exchanges’ that the proponents who all came out of nowhere with no industry expertise and were uttering the word ‘crypto’ at every opportunity with almost foaming-at-the-mouth obsession, all of which are now either under sanctions, in jail or on the run.

Surely by now, with the penny finally dropping at Britain's FCA resulting in the regulator banning it in the United Kingdom, the world would finally begin to understand that by and large, cryptocurrency is a fraud.

Yet somehow, NASDAQ has managed to sign off its due diligence bureaucracy and allow Coinbase to list with a potential $100 billion raise from issuing shares to the public.

Does this mean that if one day Coinbase's leadership team decide to do what MtGox did and get chased to Costa Rica by the FBI, not only will those who exchanged their good, old fashioned Queen's Head-imaged pieces of paper for 'airware' with no recourse will lose, but so would those who buy stock at this enormous price.

The hyperbole last year in the advent of the ban by British authorities went along the lines of that taking into account the growing trend of blockchain integration into a broad spectrum of industries, it is becoming obvious that the financial industry will be leading the adoption charge.

The advantages offered by blockchain as a financial off-ramp and a processing infrastructure that surpasses the capabilities of traditional systems are making the technology a prime candidate for investments by major payment processors. It will take the giants some time to embrace the power of blockchain in full, but it is obvious that the time is nigh.

Yes. And I'm Harry Potter.

Given the FCA’s quite justified disdain for anything relating to digital assets, the banning of CFD trading with crypto assets today was unsurprising, but rather late, given the UK’s firm stance on such fraudulent schemes.

The trend of partnerships between traditional financial entities and blockchain platforms to issue cryptocurrency debit cards is still not on the rise. Rather oddly, earlier this year Visa partnered with FinCEN-registered crypto exchange CoinZoom and decentralised finance platform Eidoo.

Who uses these? That’s right. Nobody. It is likely that any broker that went down this route would find that their bank would terminate its relationship with them on grounds of anti money laundering rules.

The financial establishment vs the crypto disruptors

It should be noted that Visa’s role in the cryptocurrency industry is not limited to partnerships with promising projects. In May 2020, the USPTO (the United States Patent and Trademark Office) announced that Visa Corporation had applied to develop a digital currency using blockchain technology. The currency is said to include assets such as the US dollar, euro, pound and yen. This technology will use a centralised computer that receives requests with a serial number and physical currency denomination, according to the USPTO.

Traders complaining that volatility has been notable by its absence until March 2020 when a modicum of movement returned to the currency markets likely have not seen the most of it yet.

It is perhaps fair to say that the prudent among us will avoid any buying of Coinbase's early stock, but instead will trade the currency markets as this huge IPO and its potential destabilizing activity rock the currency markets. Especially if real dollars and pounds are put into Coinbase and converted into thin air - literally!

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