How Coinbase could disrupt traditional brokerages and dominate the investment market

The last few months and weeks in the crypto world have been intense to say the least. Words like “bubble” and “mania” are used all the time. Over the U.S. Thanksgiving holiday, Coinbase — the leading exchange among newcomers to the crypto-world — reportedly opened over 100,000 accounts. Recent reports suggest that Coinbase now has more accounts than traditional brokerage Schwab.

The company is, however, going through some growth challenges. It has faced governance issues around supposed insider trading of Bitcoin Cash and has suffered from frequent outages, making trading unavailable for long periods of time and frustrating customers. In short, Coinbase is going through its “fail whale” period.

However, the company is quietly and rapidly executing a classic Trojan Horse strategy, which, if successful, could end up putting traditional brokerages out of business.

That may sound like hyperbole, but I mean it. Let me explain why.

Step 1: Coinbase becomes the de-facto location for natively crypto assets

Coinbase has almost reached this milestone already — at least among mainstream U.S. consumers. The company added Bitcoin Cash support a few weeks ago and is headed down the path of supporting ever more crypto assets. While the company stated in a blog postyesterday that it has made no decisions about adding new currencies, it also referenced the Digital Asset Framework it announced in November, whose sole purpose is to vet new crypto assets and add them to Coinbase’s GDAX exchange. (GDAX is a version of Coinbase intended for professional traders.)

Chatter on a cryptocurrency forum last month, coupled with a screenshot of Coinbase’s supposed coin pipeline, gave rise to rumors that Dash, Ripple, and Monero would be coming soon. It’s common knowledge that Coinbase initially missed the boat when it came to supporting Ethereum trading, and I think the company realizes now that it could be missing the alt coin boat. I’ve spoken to enough coins that have had conversations with Coinbase to believe more coins are coming.

As the excitement continues around crypto, more and more people will start using Coinbase as a known and trusted exchange to “put their toe in the water” with crypto assets.

In marketing terms, Coinbase has “awareness” among its target customers.

Step 2: Coinbase becomes a trusted brand in the mind of the consumer

As mainstream usage grows and cryptoassets continue to come out of the shadows, Coinbase (assuming it addresses its reliability and governance issues) becomes synonymous with crypto. It’s like PayPal for digital money.

They aren’t there yet. As mentioned, the site goes down regularly, the sign up and KYC/AML process is still time-consuming and cumbersome, and the whole tax reporting issue is still up in the air, which makes the company vulnerable to regulators.

But, none of that is insurmountable…

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