Coinbase, the bitcoin trading broker that has exploded in popularity as cryptocurrencies surge and nose dive, has encountered an unusual problem for a Silicon Valley startup: Too many investors are trying to get in.
The six-year-old company crossed $1 billion in revenue last year, Recode has learned from industry sources, a tremendous rise fueled by layman interest in both bitcoin and competing virtual currencies that users can buy and sell through the app.
The company's valuation has likely at least doubled since its last valuation of $1.6 billion in August. Coinbase was only expected to do about $600 million in yearly revenue as of September 30, according to people with knowledge of the figures, but bitcoin's run between Thanksgiving and Christmas boosted the company's 2017 revenue to over $1 billion.
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Bitcoin is altogether only worth about $175 billion in market value as of today's trading price of about $10,500 — a 50 percent drop from just a month ago. And so Coinbase's $1 billion in revenue suggests it has become the most-used broker for bitcoin transactions.
Coinbase makes money not on bitcoin's price but on the volume of trades — charging both the buyer and seller usually a fee between 0.25 percent and 1 percent of the total transaction size through the site. The company serves as both an exchange and a broker of deals, though it does not serve as a market maker that holds bitcoin.
Its success has attracted overwhelming interest from outside investors in acquiring some of the company, with several shareholders telling Recode that venture capitalists and private brokers have recently begun asking them if they would consider selling their Coinbase shares.