Coinbase: The Heart of the Bitcoin Frenzy

SAN FRANCISCO — The booming stock market of the 1920s had the New York Stock Exchange. The tech bubble of the 1990s had Nasdaq and E-Trade. And the virtual currency market of the last year has had Coinbase.

Coinbase employees lining up for free food in the gaming room of the company’s office in San Francisco.CreditJason Henry for The New York Times

Coinbase has been at the center of the speculative frenzy driving up the value of Bitcoin — which topped $13,000 on Wednesday — and similar currencies. While there are many Bitcoin exchanges around the world, Coinbase has been the dominant place that ordinary Americans go to buy and sell virtual currency. No company had made it simpler to sign up, link a bank account or debit card, and begin buying Bitcoin.

The number of people with Coinbase accounts has gone from 5.5 million in January to 13.3 million at the end of November, according to data from the Altana Digital Currency Fund. In late November, Coinbase was sometimes getting 100,000 new customers a day — leaving the company with more customers than Charles Schwab and E-Trade.

The company faces challenges that are a reminder of the early days of now-mainstream online brokerages, which suffered through untimely outages and harsh criticism from traditional finance companies and government regulators. And Coinbase’s missteps make it clear that the virtual currency industry is still young, with little of the battle testing that other financial markets have faced.

An employee working in a nook inside Coinbase’s offices.CreditJason Henry for The New York Times

Coinbase’s offices in downtown San Francisco show a start-up straining to keep up withgrowth. The company offers all the usual perks: free lunch and dinner, a sizable cafeteria and a room with yoga mats and board games.

Recently, every last inch of space has been pressed into action. The day after Bitcoin hit $10,000 last week, a training session for Coinbase managers was moved to the game room because the engineering team needed to set up an emergency war room in the regular conference room.

The engineering team was trying to get Coinbase back up after the company’s site was knocked offline, overwhelmed by a wave of incoming traffic. The number of visitors was double what it had been during the previous peak — two days earlier — and eight times what it had been in June, the peak until recently.

All of the big Bitcoin exchanges went down for at least part of the day, and Coinbase got back online faster than most. Still, any sort of downtime like that would be unacceptable in more traditional exchanges where stocks and commodities are traded.

“There are some well-known places this year when we weren’t able to keep up with the volume,” said Jeremy Henrickson, the chief product officer at Coinbase. “We are not where we need to be yet.”

Coinbase employees tossed around a “talk box” during a question-and-answer session with company executives.CreditJason Henry for The New York Times

Most Friday afternoons, Brian Armstrong, the chief executive of Coinbase, holds a session in the cafeteria where employees can ask him anything. On the Friday of the record-hitting week, Mr. Armstrong discussed how the company was planning to grow and introduced Asiff Hirji, the new president and chief operating officer who will help him oversee it all.

The addition of Mr. Hirji, who had the same role at TD Ameritrade, was an implicit recognition that this new industry needs more seasoned hands to help young executives like Mr. Armstrong, who is 34. Mr. Hirji will manage Coinbase’s trading operations while Mr. Armstrong focuses on new projects.

Brian Armstrong, the chief executive of Coinbase, speaking with employees.CreditJason Henry for The New York Times

Mr. Armstrong has been running Coinbase since he co-founded it in 2012. Soft-spoken and reserved, he is an unusual figure in an industry filled with loud ideologues. He has done few public appearances during Bitcoin’s recent bull market, and he recognizes the current frenzy has come with downsides.

“It’s probably a little bit too focused on the price or people trying to make money,” Mr. Armstrong said last week. “The thing I’m passionate about with digital currency is the world having an open financial system.” […]

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