When Bitcoin Cash was added overnight to Coinbase, it soared in price.
Of course, there was some speculation about whether or not insider trading took place, because some of the buy orders were placed before the listing was announced.
Either way though, one thing remains clear... When a coin gets added to Coinbase, it's going to soar in price.
While a lot of crypto investors are familiar with other exchanges, there are many people who never venture beyond Coinbase. Yes it has more fees, but it's also very beginner friendly, and has a lot more perceived trust to it than some of the other exchanges.
It's not just being the next coin on Coinbase that gives a huge boost to a coin either.
The information provided here is for informational purposes only and should not be seen as investing advice. Our opinions on this site are only that, if you are considering an investment into cryptocurrency or anything we speak about on this site, please advise a trusted financial professional first, before doing so.
Litecoin has been on Coinbase for some time, but when the recent influx of newbie retail investors hit Coinbase after Bitcoin passed $10,000, Litecoin followed suit and had a moon of its own, moving from $90 to $300 in a very short time.
It's not certain, but the theory goes that when a lot of new investors signed up for Coinbase, they saw how cheap Litecoin was compared to Bitcoin and Ethereum, and they jumped on it.
This does actually make a lot of sense. Every day we see people in Facebook groups, on Reddit, or asking their friend in the pub, which coin is going to grow the most in 2018.
... and costs under a dollar per coin.
Now, let's not get started on the fact that cheaper coins don't make better investments. Yes, you can buy more of them, but if Bitcoin is going to 3x over a year and Ripple is going to 2x over a year, it doesn't matter how many you can buy for your $1,000.
However, retail investors don't always think like this, especially not beginner ones. Heck, even we invested in Antshares over Bitcoin because we figured Bitcoin had climbed too high already (when it was at $3,000!).
So imagine if Ripple WAS the next coin to get added to Coinbase?
In fact, imagine if something a lot more expensive, like Dash, was the next coin to get added?
This post is going to explore the criteria's that Coinbase has stated, why the current coins are there, and an analysis for which coins are the most likely and unlikely to be added.
Now of course, we don't have any insider knowledge here, but we do have some solid theories, and we've also looked at what other people are reasoning as well.
What follows isn't meant to be investment advice, but is intended to clarify our own thoughts on future coins to be added to the popular exchange.
Why Are So Few Coins On Coinbase Anyway?
Coinbase has been around since 2012, so why does it only have four coins available?
Well, part of the answer is because so few coins have been around long enough to earn their place on coinbase. They only want to work with stable, trustworthy projects. Security is highly important to Coinbase, especially as all their funds are insured.
There's also the fact that they have to make sure they don't run into any regulatory problems by listing newer coins.
Most importantly, they also don't really have a need to add more. Whereas other exchanges like Binance or Kucoin have their business model around people trading, Coinbase is more a platform for converting FIAT into crypto.
So since Coinbase isn't' an exchange, but rather a gateway into crypto, does it really need more pairings?
Since the vast majority of pairings on other exchanges are Bitcoin or Ethereum based, it makes sense that Coinbase only focuses on these.
Does that mean Neo might be the next coin added, because it has an increasing number of pairings?
Possibly, but Neo isn't the best candidate for Coinbase, for reasons we'll go into below.
However, one thing we know, is that Coinbase has announced it will add a lot more coins and services in 2018, so it does make sense to speculate what those coins are.
Requirements For A Coin To Be Added
Below is a table that outlines Coinbase's "digital asset framework", it's a very strict regiment for what they have to audit and consider before adding any new digital asset onto their platform. It's quite interesting and a longer read, but well worth understanding if you're going to be speculating.
Depending on your browser, the table below may look strange.
View this page on your desktop computer to see it correctly.
What They Care About
Why They Care
Open Financial Systems
New improved technology that is accessible to anyone through a smartphone or just plain internet access. A public and decentralized system is very important and this helps enable their vision of a trustless consensus.
Security & Code
There needs to be a working alpha or beta product that's available on a testnet or mainnet. The source-code much be well documented and peer-reviews with testing from several contributors beyond the initial development team.
Project leadership isn't centralized and is not limited to a small group. The project should have proven abilities to hit milestones along with excellent cash management. Coinbase/GDAX will apply the same "know your client" standards they do with customers to the public facing leaders of the project.
White paper's are important, but not a requirement for Coinbase. They care more about having a structured voting process for conflict resolution when important updates need to be implemented. Cash management again comes in with the governance plan having the ability to raise, reward, and allocate funds beyond ICOs or traditional investors.
Strong incentive systems for the development team and validators is a positive sign. There must be real life applications and implementation of the proposed coin. It can be on an existing blockchain or a brand new one with different architecture systems and networks than ones already on Coinbase.
Coinbase has their own 'securities law framework' and would not want any of their currencies considered a security. They also can't have any coins that break their compliance with the Anti-Money Laundering program.
Integrity & Reputation Risk
The asset, network, or application cannot be considered a 'prohibited business', Which basically means it should avoid anything to do with gambling, abusive activity, pornography, etc.
Is the market cap large enough? How often is it paired and traded? All service or work tokens are expected to be add to their supply through consensus protocols and there should be a 'material amount' of tokens in circulation.
The number exchanges supporting the coin matters. It shouldn't be limited to single geographic region and fiat/crypto pairs exist. Relative distribution of the coin should be available across many exchanges, not just Coinbase.
Coinbase values investments from venture firms and hedge fund's that have crypto experience plus the project has corporate partnerships, joint ventures, and dedicated groups working together. Dedicated forums and responsiveness of the main development team is very important. Customer demand is hard to nail down based so this should be considered very carefully.
Coinbase would like to see a growth in market cap after the network becomes more active. Demonstrating increased demand and asset holders. Again, centralization comes up and they would prefer to see projects that do not have token and node holders concentrated in a particular country or region.
Tokens backed by physical assets are categorized by securities and will not be considered for the time being. They're looking for service, work, or hybrid tokens with plenty of utility. The coin is not meant to be a tool for raising funds but should have native value for a participant to hold, obtain, or spend. An algorithmically programmed inflation rate should incentivize inflation rates and network effects. If the total supply is capped, then Coinbase would like to see the majority of tokens available for trading when the network launches.
Token Sale Structure
Ethical and professional conduct is at the heart of the whitepaper and should be displayed throughout the projects roadmap. There should be best efforts by the team to allow a fair distribution of the tokens whereby a reduction of the possibility of a small number of investors owning a majority of the supply is not possible. Ownership stake of the team should have a lockup period and everything should be very transparent when they sell or buy.
Here are the main takeaways from the checklist:
- No regulatory questions (so the coin can't be too new for example)
- It likely will need to have a mobile wallet, for user friendliness
- The code needs to be solid and secure
- The coin needs to be popular enough to meet demand
- The project needs to be solid enough to have long term survivability.
- The team needs to pass due diligence.
- The use case of the coin needs to make sense. (Does it need to be a "currency", or can it be a utility token?)
Considering that the coin needs to be popular, market cap seems like the likeliest place to start a search.
Here are the top ten coins based on marketcap:
The ones in red boxes are already added, so that leaves six others.
While it's plausible that Coinbase could add a coin that's not in the top ten, it makes sense to think that they'd add one from the current top ten first as per the market cap section of their framework. Although, something which has spent a lot of time in the top ten and recently slipped out, such as Monero, could also be considered.
From the current top ten, Ripple is most people's bet for the first to be added. It has liquidity, it's been around for a long time, it has a solid development team, and makes sense to be considered a currency. Is it going to get hindered by the fact it's not truly decentralized and is largely serving banks? Or is that going to give it more legitimacy in Coinbase's eyes?
Dash is another good option, since like the others, it is classed as a currency. It has also been successful for a long time, and has a proven track record.
What about the others?
We feel Stellar has a good shot in the future, and Monero (not in the top 10) also has an outside chance, but we don't think either of these will be added in the near term. The fact Monero is a strong privacy coin may hinder it, if Coinbase doesn't want to seen to be associating with privacy coins.
Both are solid projects though, so do your own research and decide if you think they are worth picking up regardless.
Remember, you don't have to pick up a project just because it's going to get added to Coinbase, and you don't have to ignore something just because another coin looks more favorable.
It's definitely true that any coins you pick up will likely have a huge boost if they're added to Coinbase and can therefore be bought with FIAT directly.
What about Cardano? It's fifth in market cap yes, but it's only been around for a few months, and hasn't really been proven yet.
We're not saying it's a bad project by any means, but we ARE saying it's not likely to be added to Coinbase any time soon.
Coinbase's Own Company Roadmap
Here's an interesting table for the various phases that Coinbase would like to progress towards for themselves and also in the global financial economy. At this moment, they're nearing the completion of the 3rd phase for user controlled wallets and this comes with the release of their new wallet/messaging ap/browser called Toshi.
It's clear that Coinbase is extremely bullish with Ethereum and the fact that they've created an app similar to WeChat but based on the Ethereum network proves this. But where does this leave other protocols? Will more protocols be added?
So what is Finance 2.0 to them? It's all about apps for an open financial system. They're interested in developing, purchasing, and investing into companies surrounding places like loans, identity/reputation, remittances, merchant processing and pretty much everything else involved with finance.
It's quite a strong goal and with their recent Series D, they're well on their way with a pocket full of cash to help accelerate the crypto space.
How To Use This Information
Now, we're not saying you should go out and pick up Ripple and Dash in the hopes they get added to Coinbase next, but you definitely will want to own some of the coins most likely to get added BEFORE they're added.
Once Bitcoin Cash was added to Coinbase, it was already too late to jump on the big move up, as most people bought in too late, and ended up buying at an all time high.
So if you really do want to make a strategy around picking up a coin before it hits Coinbase, then Ripple or Dash probably is a good play.
Another play you could do is to wait for Bitcoin's next major move up, and then pick up some of the smaller Coinbase coins instead.
When BTC blasted past $10,000 USD, Coinbase experienced record signups. Ethereum followed suit and blasted its way from the mid $400's to high $800's, and Litecoin wasn't far behind, moving from $75 to $300 overnight.
It makes sense that during the next big Bitcoin bullrun, the media hype that follows will see more retail buyers joining Coinbase, and picking up the cheaper coins.
If you've never purchased any other coins besides the ones on Coinbase, here's our guide to buying altcoins.
We can't tell you how many times we've seen people say "Bitcoin is overpriced, but look how cheap Litecoin is compared to it!"
Watch out for appearances on CNBC during this time as well, because Charlie Lee appearing on CNBC pre-empted the Litecoin moonshot.
Is This The Best Use Of Your Funds?
Bitcoin Cash doubled in price overnight when it first hit Coinbase, and it's likely that any other coin will do the same, but is trying to predict this the right move?
Ripple jumped up in December but then news came out that Coinbase hadn't made a solid decision yet, so buying a coin in the hopes that it gets added to Coinbase could be a bad move, especially for a beginner. It's very difficult to time these things and when something runs up because of the chance that it could be added to another exchange, but not because a fundamental shift - it's dangerous.
Many time you'll buy in at an all-time-high on these prospects so your funds could be tied up for a long time before you're in a profit.
We're not saying you shouldn't buy Ripple either, we're just pointing out that it may not be the best decision for your portfolio if that's the only reason why.
With dozens of ICO's taking place almost every single day, and hundreds of other coins flying under the radar, a better use of your time and funds could be dedicated to researching cryptos with positive signals for fundamentals, plenty of partnership, good token use and of course, proper governance.
This is the strategy we're currently working on, and we'll be sharing our results over the next few weeks and months. So far we've managed to double our experimental coin stack in two weeks, and we didn't have to rely on Coinbase adding anything.
It's definitely going to do wonders for any coin to be added to Coinbase, but there are great profits and opportunities to be had every day, so we recommend subscribing to our newsletter for free, and taking control of your profits without relying on third party exchanges to do the work for you.
Make sure to review the Coinbase requirements above and leave a comment for your own predictions.