Coinbase is seeking $40-60 million in additional funding, according to Re/code, citing unnamed sources. Such an investment would bring the company’s valuation to $400 million.
TechCrunch, also citing unnamed sources, says the company was seeking as much as $150 million. There is speculation that they lowered the figure because of investor unease over the regulatory climate, particularly in the US. Further speculation links Coinbase’s diversification into Europe to such concerns.
TechCrunch’s sources also say that Bitcoin’s price volatility and recent underperformance is making investors uneasy. However, Coinbase’s business model apparently functions independent of bitcoin prices. When a merchant accepts bitcoin for payment and has it converted to fiat, any applicable commissions are levied based on the dollar value of the sale. Perhaps investors are concerned that prices will decline further, to the point reflecting uncertainty in Bitcoin’s future as a payment system.
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It is also possible that investors are accounting for the return-on-investment (ROI) issue. Despite its popularity- Coinbase now hosts over 2 million wallets- the company’s ability to adequately monetize its offerings comes into question. The same can be argued for numerous other similar services, such as Circle, Blockchain and Xapo- and perhaps another appropriate analogy to the early days of the internet and its publicly traded companies.
Coinbase’s wallets are free, as are merchant conversion fees for the first $1 million in sales. Thereafter, 1% is charged. Although over 37,000 merchants are supported, Coinbase’s revenues hinge upon their bitcoin-based sales volume.
It may be risky for Coinbase to increase their fees in an effort to increase revenues. This would lessen their value-add over the payment systems they’re competing with, such as credit cards.