Coinbase Rejects MicroStrategy's Bitcoin Buying Scheme

Michael Saylor's MicroStrategy has been a trailblazer in institutional Bitcoin adoption, with its aggressive accumulation strategy serving as a model for many other companies.

Coinbase is a leading cryptocurrency exchange that is known for its wide range of services, including an exchange, a wallet, and an institutional division. The company is also a significant investor in cryptocurrency, and it has been following the investment strategy of MicroStrategy with great interest.

MicroStrategy is a business intelligence company that has become well-known for its massive bitcoin accumulation strategy. Since 2015, the company has been investing heavily in bitcoin, and it now holds over 150,000 bitcoins, making it one of the largest institutional holders of the cryptocurrency.

Coinbase was initially considering adopting a similar bitcoin investment strategy, according to Brian Armstrong, the CEO of Coinbase. In an interview with Blockfolio, Armstrong revealed that Coinbase had been contemplating investing a substantial portion of its balance sheet in bitcoin.

"There were definitely moments over the last 12 years where we thought, man, should we put 80% of our balance sheet into crypto - into bitcoin specifically," Armstrong said.

However, Coinbase ultimately decided against pursuing this investment strategy, opting instead for a more cautious approach to cryptocurrency investments.

Why Coinbase Rejected A Bitcoin Buying Scheme Like MicroStrategy

Coinbase was planning to invest up to 80% of its balance sheet in bitcoin, but the startup decided not to follow through with the scheme.

"We made a conscious choice about risk. We were like, okay, we could take a startup, which is inherently risky, and then put 80% of the balance sheet into one asset, which is risky in another way, and then we'd be really risky. Or we could be a little more diverse. So we decided to be a little more diverse and invest in a basket of crypto assets," Armstrong explained.

Coinbase is known for its significant cryptocurrency holdings, with the majority being bitcoin. In the first quarter alone, Coinbase invested $153 million in cryptocurrency, and its total crypto portfolio is valued at $1.3 billion, as of March 31.

Coinbase is planning to continue investing in cryptocurrency and expand its crypto treasury. "We’re going to continue to invest in crypto. We bought $153 million of crypto in Q1. We’ll see what the cadence is going forward. We’re not in a hurry. We’re planning to invest more. Don’t read into the number. We’re going to be opportunistic and invest more. CFO Alesia Haas also stated that they are not planning to compete with their customers for trades. "Rest assured, we are not stopping there," she said.

Recently, several companies have been following in the footsteps of MicroStrategy by investing heavily in bitcoin. One such company is Metaplanet, which is often referred to as "Asia's MicroStrategy."

Earlier this year, Adam Back, the CEO of Blockstream, reported that Metaplanet has managed to generate even greater returns from its bitcoin investments compared to MicroStrategy. Moreover, several bitcoin miners and smaller firms have adopted an investment approach similar to MicroStrategy's, which involves funding their bitcoin purchases through stock and debt sales. This trend has contributed significantly to the increasing adoption of bitcoin.