Why Does Coinbase List Sh*T Coins?
So yesterday was quite the day. I woke up and apparently the nickels in my piggy bank were worth around $3 million USD. Don’t believe me? Look at this chart:
Now look at my piggy bank:
I rest my case.
Once I discovered that I had enough money to survive another 3 months of inflation and soaring costs of living, I decided to kick back, relax (lol) and scroll through Twitter when I came across a tweet from one of my favorite Twitter follows, @Cobie:
The chart on the left is for AIOZ and the chart on the right is for ERN, and as someone with functioning eyes and a semi-functioning brain, I can confirm that both charts look like downhill slopes. After a quick search I was able to find that at the time of writing, AIOZ was the 438th ranked crypto in terms of market capitalization, and down 93.1% from its all-time high. ERN was ranked 483rd in terms of market capitalization and down 92.9% from all-time highs. Twins Basil, twins! As someone who once minted an NFT of a rainbow bull with a poop emoji necklace, I know a thing or two about sh*t coins and being a degenerate, so my cause for concern about asset listings should be taken very, very, VERY seriously. Here is my former NFT by the way:
Sick, I know. Made about .25 Eth off of it, whole big thing. So why is Coinbase listing small-cap coins that are unproven and incredibly risky and then making them easy for crypto newbies to buy? I probably won't find a good reason but let's see what we can come up with.
Coinbase Criteria
In January 2021, Coinbase launched Asset Hub. Think of Asset Hub as a branch of Coinbase that reviews projects and decides if they can get listed on Coinbase. According to the Coinbase website, “Coinbase’s standard listing evaluation framework uses the data that is submitted via Asset Hub to ensure that every asset Coinbase supports meets our eligibility requirements for our legal, compliance, and technical security reviews”. On the website, they give a “don’t do this” list if you want approval. You will not find a place on the website that boasts about listing quality assets, because that is not their goal. Since 2017, Coinbase went from listing just 4 assets to a staggering 186 as of March 2022.
With the growth of crypto as a whole, it is not surprising to see more projects listed on one of the world's most recognizable exchanges. What is surprising is seeing the quality or lack thereof in the projects that are listed.
Coinbase Doesn’t Care About Project Quality
So how does a company grow from only 4 assets to 185 in a short amount of time? It l̶o̶w̶e̶r̶s̶ ̶t̶h̶e̶i̶r̶ ̶s̶t̶a̶n̶d̶a̶r̶d̶s changes their model. Here are some comments on asset listing decisions from Coinbase CEO himself, Brian Armstrong:
The tweet that especially stood out to me was #4. In case it’s not clear, he is saying, “We here at Coinbase collect fat stacks in transaction fees whether you guys make money or get taken out back behind the woodshed so best of luck to you degenerates”. Ok, that may be a little harsh but I’m not entirely wrong. It can’t be understated that probably 99% of Coinbase users aren’t following the CEO on Twitter or reading this blog, so I’d bet a majority of users are under the impression that a Coinbase listing is THE stamp of approval.
What Duty Does Coinbase Have With Sh*t Coins?
Before I continue, I want to apologize for the terrible pun I made in the header of this section (duty…sh*t coins). My dad came up with the idea and as a thank you for his proofreading, I told him I would add his joke. Moving on. As the groundbreaker of crypto in the US, Coinbase is naturally going to find itself in the middle of the crosshairs on a wide range of subjects. While Coinbase lists sh*t coins, there is a logical debate to be had on whether or not it should be acceptable to do so. On one hand, you have those on the side of Coinbase who believe that markets should be free and not have a centralized party saying what consumers can or cannot buy. After all, that sounds like SEC chairman Gary Gensler every day. Most people are tired of content being censored and being told what is good for them. On the other side, there are those who believe Coinbase may have the duty to list quality projects with clear use cases only. Obviously, nobody is asking Coinbase to list coins that only go up, but some of these listings just make you shake your head. Brian Armstrong said to do your own research, but how many people in crypto are even capable of doing quality research? Coinbase’s monthly transacting users quadrupled in 2021 to 11.4 million so let’s not pretend the newbies are doing quality research. Maybe someone new goes to a project's website and the website looks cool and talks of big ideas. Seasoned investors know that the website and execution are two different things, while a newbie thinks they found the next hidden gem that they will retire off of. A perfect example of this is a new Coinbase listing called Pawtocol (UPI is the symbol). It is a micro-cap worth 15 million and ranked 918 amongst all cryptos. I mean look at this website.
How can you not invest in 3 cute dogs and an Ewok? Plus, instead of saying “protocol”, they spelled it like those people who talk to their animals in baby voices would. They even got an endorsement from all-around good guy Jordan Belfort aka Wolf of Wall Street (aka inmate #1894). The project states they are going to “use the power of blockchain to create better lives for pets and pet owners all over the world”. When you read their whitepaper they tell you how their product is going to fix everything, but does making an NFT of your dog really make the pet world all that improved? I’ve seen plenty of projects talk a big game and fail to come anywhere close, but a new investor won’t know that. I think it's reasonable to assume that in a rapidly growing sector that is especially appealing to younger people, there are going to be projects ripping off naive investors. We all like to think we were super smart investors from day one, and if you were kudos to you, but let’s face it that a majority of people that get into investing do dumb things when they get started. It feels like we aren’t necessarily leading pigs to get slaughtered, but we locked Michael Meyers in the pigpen and said screw it let's see what happens.
What Could Be Improved?
IMHO, some of these projects need to be flagged and handled as if they are a penny stock. Penny stocks are still tradeable, but they require a more difficult “barrier of entry” meaning you have to jump through some extra hoops if you want to trade them. Maybe when I try to execute a trade there should be a pop-up informing me of extreme risk in micro/small cap projects. When I went to the ERN listing on Coinbase, the only thing it said was that it was an “experimental asset” (Can I please stop being the subject in experiments? Looking at you CDC) but that was only in the desktop version. On the mobile app, there was not a mention of risk. There was not a single educational piece about the project to be found on its Coinbase profile. It doesn’t even tell me what the ERN role is. I think Coinbase could try to add a scorecard/rating system where users can discuss things about a project. Are they responsive with customer support, do teams follow their project roadmap, are there constant delays? It’s not a perfect fix but it’s a start.
Coinbase doesn’t offer crypto index funds, and in an indirect way, it is forcing its users to become individual coin pickers. I come from the world of stocks and it is a big no-no to be an individual stock buyer unless you are dedicating serious time to learning about companies and markets. At the end of the day, individual investors should always be responsible for hitting the buy/sell button, and nobody is forcing them to invest. I just believe that for a company that is worth billions, it is a piss poor way to run a business. Don’t tell me you can’t hire a team to make quality educational profiles for every asset listed. If you only list an asset with no information about it you are no better than a bookie. Coinbase knows that the users they make money off of are fairly new, so they can’t pretend they are dealing with experienced investors. When you have new investors picking individual investments, that is a huge potential for disaster. As a company that loves to pride itself on its educational aspect, all I ask is they start to treat customers with just a little more care.
What is your take on Coinbase listings? Do they need improvement or continue as is? Please leave a comment so I don't feel like I’m talking to myself. If you like the content please hit that follow button, if not oh well.
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