Coinbase (COIN) has a strategy and a plan.
The most popular digital currency trading platform in the United States is making its way despite skepticism of some financial analysts. The firm plans to launch a marketplace dedicated to non-fungible tokens, Coinbase NFT, thus betting that these digital property titles are a long-term economic opportunity.
The platform has thus created a separate website from the crypto trading platform. On this website, the company explains what its NFT marketplace will be.
"Coinbase NFT is a digital marketplace where you can mint, collect, discover and showcase your NFTs, all in one place."
This marketplace will initially be accessible only to people residing in the United States, but Coinbase plans to open it to other countries thereafter.
However, so far, there's no official launch date: "Coinbase NFT is coming soon," the company said.
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"Wen Coinbase NFT? Soon. We recently met with 100+ creators and we’re continuing to build the product based on community feedback. We appreciate your patience and can’t wait to show you what we’re cooking up," Coinbase posted on Twitter last month.
The crypto exchange has already indicated that what will make the difference between its NFT platform and other marketplaces will be its "social function," in order to create a bridge between creators, artists and users.
"For our own NFT marketplace, we're also focused on a social experience, building a community," Emilie Choi, president and chief operating officer, told analysts during the fourth quarter earnings' call. "So the person who is architecting this came from Instagram and had social roots, exclusive content and partnerships, and then distribution."
"So today, people can buy on Coinbase, transfer to a wallet and then go to the marketplace. If they can do that all in one app with a few clicks, that's a win, and it feeds into the ease of use that we think we're quite good at," she argued.
Investing in NFTs is one of the avenues of revenue that Coinbase is exploring beyond trading. The company is feeling the pressure to expand as diversification of revenue could help decoupling the share price from the price of crypto assets, according to industry sources.
"We're really excited to launch our NFT platform. We view this as a very large addressable market with new and existing users who are clamoring for a different NFT experience, a simpler NFT experience," chief financial officer Alesia Haas said during the fourth quarter earnings' call. "It still tends to be a little bit complex. And what we like right now while we're observing the market is that NFT volume and price appear less correlated with other crypto assets."
She added that: "It's difficult to predict the future but we do hope to see that investors recognize that we are a diversified platform and will start to see our price decouple from overall crypto rising prices."
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Is NFT a 'Really Big' Opportunity?
The only problem is that the NFT market, still unknown at the start of 2021 before its explosion at the end of the year, has slowed down. This is what Dan Dolev, analyst at Mizuho, just pointed out in a new research note.
"In a year in which profitability may be challenged, we question the strategic rationale of chasing NFTs, especially as interest in NFTs appears to be dwindling,” Dolev wrote to its clients.
Dolev said that Coinbase may spend up to $300 million this year on its NFT business while overall company profitability could see headwinds, along with higher operating expenses.
Since the publication of this note, Coinbase stock has been falling. Shares were down 4.75% at $168.85 as of time of writing.
According to DappRadar statistics, OpenSea, the U.S. NFT marketplace leader, has seen a 19.46% decline over the last 30 days in active users, and a drop of 22.07% in internal transactions. The volume decreased by 20.97% over the same period.
It is not sure that this is enough to discourage Coinbase.
"We're really bullish on NFTs. It's going to be much larger than just digital artwork or something, which a lot of people are thinking of it as there's going to be all kinds of in-game items in the metaverse," Coinbase CEO Brian Armstrong said enthusiastically during the fourth-quarter earnings' call.
"There's domain name and like ENS name-type assets that are being created out there. There's citizenship and governance and like various novel fundraising mechanisms. So this segment is going to be really big."
He insisted that: "I think it's all about building the future."
