Unchained - Unconfirmed: Why This Analyst Puts Coinbase in the Most Exclusive Club of Stocks - Ep.229

Episode Date: April 16, 2021

Gil Luria, director of research at D.A. Davidson, talks about Coinbase’s performance on its first day as a public company. In this episode, Gil discusses: the significance of Coinbase going public (1:05) why doing a direct listing was a risky move (1:31) why he revised his price target for COIN from $440 to $650 (3:17) how investing in COIN as a “pure play” crypto company compares to buying stock in companies like MicroStrategy and Square (5:06) why some people are disrupting Coinbase’s actual market cap (7:11) whether Coinbase can smooth out revenue over the long term and not be so correlated to the crypto markets themselves(10:45) what sort of statistics Gil is looking for in valuing Coinbase (13:08) why Gil thinks Coinbase can meet its goal of growing non-transaction revenue from 4% to 50% in five to ten years (15:32) how Coinbase could navigate the compression of fees that will occur as competition increases among exchanges (17:33) whether Coinbase’s stance as an apolitical company could affect the stock price in an era in which companies are getting involved in issues like voting rights (19:45) whether the Bitcoin price and COIN stock price will always be highly correlated (21:18) which other crypto companies are good candidates for going public as well (22:35) weekly news recap (24:03)   Thank you to our sponsors! Download the Crypto.com app and get $25 with the code “Laura”:  https://crypto.onelink.me/J9Lg/unchainedcardearnfeb2021    Check out InterPop, a superteam redefining the future of NFTs and fandom! https://hellointerpop.io/?utm_source=Unchained&utm_medium=episode-sponsorship&utm_campaign=interpop-launch&utm_content=interpop    Episode links:   Gil Luria Twitter profile: https://twitter.com/gilluria   Introducing Crypto’s Amazon Moment (written by Gil): https://unchainedpodcast.com/wp-content/uploads/2021/03/DA-Davidson-Coinbase-Initiation-20210302.pdf  2013 Quote from Gil on Bitcoin: https://www.streetinsider.com/Analyst+Comments/Bitcoin+Could+Be+Worth+10-100x+Current+Price+-+Analyst/8936836.html Previous Unchained Appearance: https://unchainedpodcast.com/is-coinbase-stock-a-good-buy-this-analyst-says-yes/    Related Content Ellie Frost Blog: https://frostbyte.substack.com/p/coinbase-earnings-some-less-obvious  https://frostbyte.substack.com/p/coinbase-earnings-will-blow-you-away Tweet Thread on Market Cap Discrepancy w/ Comment From Jeff Dorman https://twitter.com/laurashin/status/1382746574577668111 https://twitter.com/jdorman81/status/1382749674105237507 Forbes Coverage of Coinbase Direct Listing: https://www.forbes.com/sites/jonathanponciano/2021/04/14/coinbase-skyrockets-in-nasdaq-listing-landing-105-billion-valuation-on-first-day-of-trading/?sh=3afb44928dc1  https://www.forbes.com/sites/jeffkauflin/2021/04/14/coinbases-ipo-creates-a-multibillion-dollar-windfall-for-founders-now-it-faces-five-big-threats/?sh=13405d8e61ff  Brian Armstrong CNBC Interview on Transaction Fees: https://twitter.com/SquawkCNBC/status/1382279472599162880?s=20 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unconfirmed, the show that reveals how the marquee names in crypto are reacting to the week's top headlines and gets the insights keep on what they see on the horizon. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto over five years ago and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. The crypto.com app pays you up to 8.5% interest on your Bitcoin. Get $25 when you download the crypto.com app with code, Laura. The link is in the description. You may have heard about Interpop, a superteam laser-focused on the

emerging landscape of fandom. They are tapping into the latest innovations in NFTs to revolutionize gaming, collectibles, and comics on Tezos. Learn more at hellointerpop.io. Today's guest is Gil Loria, Director of Research at D.A. Davidson. Welcome, Gil. Hey, Laura. Good to see you. Nice to see you on a big week for crypto. As the first Wall Street analyst to cover Bitcoin, what would you say is the significance of Coinbase being public? It happened. It worked. The direct listing worked. I was anxious going in, but here we go. Eighty-five billion dollar company that all they do is crypto. The listing was successful. They're trading nicely. It's starting to stabilize. I would call that a great success.

So the reference price was 250. Trading quickly searched the price to around 400, but a coin did close the day at $328. What were your takeaways from that first day of trading? The direct listing is a not often used way to start, especially for a company of this size, to start listing on an exchange. It is a very high risk way. Coinbase took a really big risk doing it this way. There's been a We could talk about those, but what that means is there is not an investment bank or an investment banking syndicate that controls the trading that day, that controls the marketing ahead of time. And that's a really big risk because the firms, D.A. Davidson at our scale, the Goldman Sachs and Morgan Stanley are the bigger scale. They have refined the craft of the IPO over many decades. And so deciding to not have them lead the process to. to go to a direct listing was actually pretty risky move.

I understand why they did it, but it was a pretty risky move. It's what made me anxious. But it worked. It worked because there was so much supply, so much demand, the market found itself. The reference price was a good reference price. It was the right reference price. Where the stock trades now is pretty close to some of those late private company transactions that happened in the weeks leading into the listing.

which is good because it doesn't have to go that way. And what I like the most is a stock analyst that recommends stocks is it didn't go too high. If it closed yesterday at $800 or $1,000, I wouldn't be able to recommend the stock. And that would be hard. Yeah. Before your target price for coin was $440. And so since it didn't quite reach that, what did that say to you? Well, a few moving parts for me yesterday.

So what I did this morning was increase my price target from 440 to 650. And there were a few moving pieces. The first is actually that the eve of the listing, they disclosed that their share count, they consider it's $261 million. And maybe we could talk about that a little bit more later. So that's more than I thought. I originally had about $206 million shares. So that's one moving piece.

The second moving piece is that the listing went well. Had the stock traded down or down significant? significantly yesterday, the whole momentum would have been impaired, not just for Coinbase, but I would say for crypto. That didn't happen. So that was great. That removed a really big risk that allowed me to treat it more like an established public company as opposed to a not yet listed public company. And the last thing I did was say, well, okay, if these guys have all this growth that I believe they have, they just reported a fantastic quarter. and they're listed and all went well, then I can put them in the most exclusive club of stocks. These are market-leading, open-ended growth stories.

And I would consider there's a handful of stocks in that category. Zoo, Snowflake, Octa, Crowdstrike, and Shopify. Those stocks trade between 25 and 70 times this year's revenue. I put Coinbase pretty much in the middle to lower end of that range at 40 times revenue, and that's how I get to $650 a share. Wow. And just to go back to your earlier comments when you said that the direct listing did go well, even though it was risky.

So what does that say to you about the demand for coin? Well, it's what we talked about last time, which is there's just a tremendous amount of excitement about being able to own. a liquid established company that all they do is crypto, a pure play crypto company that's large, established has a great brand. And people were looking forward to that. And one of the interesting things you saw yesterday was that other public companies that have been a quote unquote play on crypto,

they lost some steam yesterday as people were selling that exposure to gain exposure to Coinbase. and because it's such a good pure play investment. And I think that's one of the things we saw yesterday. Again, the supply is substantial. Direct listing means everybody gets to sell their shares. There's no lockup periods. There's no controlled selling.

There's no market stabilization. Everybody could just sell their shares in the open market. And so that's a lot of supply. The demand was there. People wanted exposure to Coinbase and they were able to get it. And earlier when you talked about companies that saw their stock prices drop a little bit, are you talking about kind of like the micro strategies of the world or other companies that are viewed as gaining exposure to the price of Bitcoin?

Yeah, even Riot, Marathon, but even companies like Square. Square stock was down yesterday. A lot of people invested in Square over the last year or two because of how it made it possible to getting exposure to Bitcoin. It was a big part of the stock's outperformance over the last year, too, was the tremendous amount of revenue they report based on Bitcoin, based on crypto. I'd argue their accounting is a little needs to be questioned a little bit, but it's been a big part of that story. And so that stock also underperformed yesterday. And so now let's talk about the coin-based market cap. Shortly before recording, I saw it was

that 62 billion. You did mention an $85 billion number. I'm not sure. Was that what it was at yesterday? So that goes back to that share count question. If use 261 million shares times 3.30 or wherever it ends up closing today, then you get the higher number, right? If you use the 200 million or 206, this is still somewhat subject to interpretation. It won't be for long. Then you get to a lower number. Yeah, so on Twitter, I did ask people why they thought the Coinbase Market Cap wasn't in the $100 billion range that people had been talking about earlier. And Jeff Dorman of ARCA tweeted that the media has been using the wrong share count, $261 million, where he says that there are actually $198 million, Class A and Class B shares outstanding. So I just wondered, you know, what's your take on kind of what is the better number to use? Yeah, so let me take you a little bit into the inside-based.

ball of stock research. There's a lot of things that we as analysts try to predict ourselves, and we only consider what the company tells us as un-input, how much revenue they're going to generate, how much profit they're going to generate. Those are the kinds of things that our job is to predict, and the company's input is just an input. There's things that when the company tells us, we don't really question. They put out an 8K, an SEC filing the night before the direct listing saying our share

account's 261 million. Just like if they told me they're going to pay 20% taxes next year, I wouldn't question them. I'm not going to question them on their share count. That conversation will get refined as they file their next report. So as they start filing 10 key reports and 10K reports, there's going to be even more detail. And there's going to be a consensus formed about which share count to use. That consensus is formed by sell side analysts, people such as myself and the other analysts at D.A. Davidson and analysts at other firms, we all decide on these, what share account do we use, again, what tax rates we use as settling. And the aggregators, Thompson Reuters, Faxe at Bloomberg, then decide which one to use. So a lot of detail to say,

as long as the company says it's 261 at this point of the game of a newly listed company, we're going to go with that. But we'll find out more about what the right number to use is, as they file more filings. Now, there'll still be multiple numbers. There's a basic share count. There's a diluted share count that they report. Anybody can do their own calculation about which of the warrants to use at, what strike price, et cetera.

You can always refine that as you go. But the end of the day, there's a consensus number what cell site analysts decide on. And when they said that they're guiding us to using 261, that's the number we're going to use. All right. So in a moment, we're going to discuss Coinbase's outlook for the rest of the rest of the in the year, but first a quick word from the sponsors who make this show possible. Meet Interpop, a super team redefining the feature of NFTs and fandom. From comics and trading card games to digital collectibles and everything in between,

they are building the architecture of an entirely new landscape of fandom, using technology built on the TASOS blockchain to drive their vision. Visit hellointerpop.io to learn more. Back to my conversation with Gil Loria. Ellie Frost pointed out in her Frostbite newsletter that in Coinbase's Q1 earnings, the company only gave its total revenue, which was $1.8 billion, as well as trading volume, which was $335 million. And she said that this translates into a 54 basis point's take rate, but that that doesn't necessarily mean that retail users came out in force since assets on the platform grew from

90 million to 223 billion between Q4 and Q1. And then she made the point, people could have bought on Coinbase two quarters ago, but kept their assets on the platform. And Coinbase may simply be earning more revenues from those people because the subscription revenue is based on the assets on the platform. So what does all that say to you about Coinbase's ability to smooth out its revenues amidst any of the ups and downs in the crypto markets? Those are all great points. And we're going to get, again, over time, company just listed yesterday, over time, we're all going to get much better at utilizing numbers we have and the numbers they provide to being able to forecast their results going forward to parse things a little more finely. So I'll make a couple of points on that. One is a majority of their assets and majority of trading volume are already institutional. Those come in at much lower take rates. So the interplay between institutional,

trading and retail trading is going to be very important, and hopefully at some point, they start disclosing that. They've already given us some hints, and hopefully there's continued disclosure that will allow us to model that well. The point about subscription revenue is spot on. Subscriminary revenue is often going to be based on the level of assets. That's the case for money managers, like Fidelity or T-Rote price. Their revenue, even if it's recurring, is still based on the level of assets.

assets. So that will be volatile, not as volatile as trading volumes, but it will still have ups and downs as crypto goes up and down. And that's a small part of the revenue at this point anyway. So as you know, as we spoke of last time, their results will be much more volatile than other companies. But as long as they grow with the crypto economy, they'll grow a lot over time. And that's what is getting people excited. Among the many eye-popping figures in the Q1 earnings, Coinbase showed that monthly transacting users grew 118% quarter over quarter, whereas verified users only grew 30%.

What's your takeaway from that? And what does that say to you about where Coinbase will end up this year? Well, so those are interesting metrics for us, for them to emphasize. The monthly active users, that's going to be a function of volatility. As we keep saying, these coin misses result are going to depend on how volatile crypto assets are. One of the reasons is the more volatile they are, the more active traders there are, which is how they generate revenue, right, on those trading commissions. So you'd expect in a time of great volatility, the number of active traders would grow faster than the number of overall users. And there would be the reverse as volatility goes down.

If volatility goes down, price of crypto assets stabilizes or stabilizes the lower place, the number of monthly traders has tended in the past to decline, not just gross lower, but actually decline. And that's something to pay attention to. What I found interesting about them guiding to that metric for the balance of the year is that I'm not sure that's a great metric because it doesn't capture that interplay between retail and institutional. Retail is paying a far higher take rate than institutional. That matters to me a lot more than the number of active traders.

That number of active traders counts me buying a Satoshi here or there the same as Elon Musk buying a billion a half dollars all at once. And so that's not a great statistic. You shouldn't be counting those two things the same. All right. So then for you, what numbers kind of will you be looking for? that that mix of trading volume between retail and institutional and as we get our analysis refined, how are the take rates within those categories changing?

Are the consumer take rates being pressured as people are expecting? I'm not sure about that. Are the institutional take rates holding up as more and more offerings come into the market ETFs, grayscale, becomes more competitive, et cetera. I think if we're going to focus on three or four metrics, those are the ones that I'm going to be focusing on. Coinbase CEO, Brian Armstrong said that over the next five to ten years, he expected 50% of the company's revenues to come from non-trading products and services. This was in a CNBC interview. What do you think of that projection?

It's good for him to put that as a stake in the ground, right? He's starting at 4%. So he's got a ways to go. But he needs more products like custody, like managed staking. There's going to be applications that they provide. They're invested in the crypto economy. They're invested in crypto companies. They're going to incorporate those kinds of products.

The goal is for those products to generate more revenue. But that's a long-term goal. For the foreseeable future, it's still going to be trading commissions. But do you think he could achieve that 50% goal within five? Oh, wow. Okay. Absolutely, because again, the crypto economy is developing at a rate that we haven't seen. And, you know, the analogies, you know, I like to go back to the Internet and how the Internet developed.

And what was Amazon doing in 1997 when they went public? They were mostly selling books themselves, right? And none of us was expecting them to figure out that it's actually the 3P business, the helping other people sell, and the prime business. and increasingly the cloud business that were going to be the most important ones. Jeff Bezos may have imagined it, but we sure didn't. We just knew that Amazon was way ahead of the pack. They had tremendous leadership.

And they were so customer-centric, which was the absolute key to their success. And I see a lot of parallels with Coinbase. They're well-managed. They understand the game. They're participating in it. They know how to address the crypto community. they know how to address the regulators. They know how to address the investment community.

They're in really good shape to be the ones that help bring to market more and more products. In the next several years, most likely there will be some margin compression and trading fees. What do you think is Coinbase's best bet for navigating that? And when do you think that might happen? So they have to make sure that they stay focused on their value propositions on both sides. So on the consumer side, their value proposition, Opposition is ease of use. It's the security. It's the fact that they're the pure play, right? I have somewhere, I have more than 10 financial applications on my phone. I have PayPal, Venmo, I have this bank, I have that bank. And so the fact that they're focused is very important for them. So they need to stay focused. They need to stay safe. And they need to continue to offer more and more tools like Coinbase wallet for those people that prefer my key, my coin.

On the institutional side, it's the same in terms of security. Again, that's going to be the most common aspect. Compliance is going to be tremendously important institutional investors. Visibility. The fact that Coinbase is publicly traded is part of what's going to make them attractive to institutional investors going forward. They're the visible company. They're the company that has to disclose of all of its financials.

They're the company that their hurdle for compliance is so much higher because if anything wrong happened, it would be so much more visible. So if they can stay focused on the consumer side on some of those elements, on the institutional side on those elements, they will continue to have some pricing power. But competition always happens, and especially in categories like this that grow so fast and are inherently competitive. right? In a decentralized economy, a decentralized market, it's inherently more competitive than centralized markets. And they need to understand that and continue to focus on those elements. Yeah, I agree with you. I do think security probably is one of their top ones. And it's just one of the, like I noticed in your disclosure, you cited that as a risk. And it's one of those things that's hard to quantify. But Coinbase obviously is pretty much the only exchange in the space that hasn't been

hacked, which is quite an achievement. Knock on wood. Yeah. Last year, Coinbase notoriously stated that it is an apolitical company. Do you say that harming it as a public company, especially at a time when more public companies are being more vocal when it comes to issues like voting rights? Boy, that's really tricky. All companies, all corporations, public and not public, have to contend with how to deal with this much more complicated political environment and the interplay between politics and corporate life. I'm not sure I agree with how they handled it.

I wish they handled it differently. We had DA Davidson sure handed it differently. We're very much internalized the effort to increase diversity and inclusion and make that part of our strategy. I wish Coinbase did the same, but I don't think of that as being an investment criteria. I think of that as being a civil responsibility and a corporate responsibility.

but to me, as a cell-side analyst, as a research analyst, trying to make a decision about the stock, I'm not going to hold down to that standard. When I covered Etsy, who is the polar opposite, right, a B-Corp, super environmentally friendly, I love that they did that. I didn't give them any credit for that as a stock, though. I have to keep those things separate. I can be a citizen and a civilian on one side with an opinion about corporate behavior, behavior and corporate responsibility, but as a research analyst that evaluates stocks, I have to

keep that separate from my opinion. How do you think the Coinbase direct listing affected the price of Bitcoin? And going forward, how closely do you expect the Coinbase stock price and the Bitcoin price to be correlated? So let's talk about causation, right? Because the correlation is one thing, but the causation is going to go the other way, right? Changes in crypto assets are going to drive Coinbase results. So Coinbase will very much trade.

like crypto assets, which is primarily trade like Bitcoin going forward. What they have to prove, the burn of proof on them, and what I believe it makes Coinbase unique, is that I believe they're a diversified play on crypto. So even if it's not Bitcoin that wins, they'll still win, which gives them an advantage. If other assets perform very strongly and at the expense of Bitcoin, they'll still really benefit. So what we're going to really have to watch is they're going to be correlated, but is Coinbase less volatile or possibly positively leverage, which is what we saw in the first quarter. We saw this extraordinary profitability number as Bitcoin was going up, as crypto assets were

going up, that showed positive leverage. If they can show more positive than negative leverage, that's what's going to make Coinbase an interesting way to invest in crypto. Are there any other crypto companies you have your eye on as being good candidates to be publicly traded? Well, you know, I have a tremendous amount of respect for Grayscale. I've worked with those folks. I think the folks at Cracken do a great job at Circle. Very good, strong companies. The miners are interesting. There's a couple of publicly traded companies there. And I'm hoping and expecting more public company formation for no other reason, because it's going to give us more information about what's going on, more results and more ways to invest in this fantastic. growth of the crypto economy. All right. Well, this has been so fun discussing all this with you.

Thank you so much for coming on Unconfirmed. Always good to see you, Laura. Take care. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. With over 10 million users, Crypto.com is the easiest place to buy and sell over 90 cryptocurrencies. Grow your crypto with Crypto.com earn, which pays up to 8.5% interest on your Bitcoin and 14% interest on your stablecoins. When it's time to spend your crypto, nothing beats the crypto.com visa card, which pays you up to 8% back instantly and gives you 100% rebates for your Netflix, Spotify, and Amazon Prime subscriptions. Download the crypto.com app now and get $25 by

using the code Laura. The link is in the description. Thanks for tuning in to this week's news recap. First headline. BTC hits another all-time high like clockwork. Bitcoin surged to a record high of $64,89 on early Wednesday morning. Amidst the current bull run fueled by institutional investment, NFTs, and Coinbase's direct listing, it seems a new Bitcoin peak is barely even meme-worthy. What is noteworthy, however, is that one crypto investment firm projected a year ago that the price of Bitcoin would break 62K this month.

In its April 2020 investor newsletter, at a time when Bitcoin traded at roughly 10% of its current price, Pantara Capital correctly projected Bitcoin would cross 62K this month. Pantara used projections based on a stock-to-flow model, which assumes that Bitcoin's scarcity drives demand and value. Pantara CEO Dan Moorhead noted, this Bitcoin rally is exactly like previous halvings. Bitcoin is likely to reach 115k by August. Pintera also correctly called when Bitcoin would break 30K, 40K, and 50K in previous months. In a tweet, Plan B, a prominent stock-to-flow Bitcoin analysts estimated, quote, BTC capitalization will continue its straight-line historical path, first towards market cap of gold,

$10 trillion, then real estate at $100 trillion. If stock-to-flow models aren't convincing enough for you, Michael Del Castillo, someone I consider a Forbes colleague, even though we didn't overlap there, reported that 24% of Forbes's blockchain 50 symposium attendees say their companies will buy Bitcoin this year, a trend that could provide the institutional capital necessary to continue Bitcoin's path toward a $115,000 price in August. And further down the line, gold's $10 trillion market cap predicted by Pantara and Plan B, respectively.

Next headline. Gary Gensler named SEC Chair. The U.S. Senate officially confirmed Gary Gensler as chairman of the Securities and Exchange Commission. Previously, he was the former chairman of the Commodity Futures Trading Commission and served on MIT's faculty, where he taught classes on blockchain. As SEC chair, Gensler's opinion on crypto will likely affect the SEC's. lawsuit against Ripple and the viability of a Bitcoin ETF in the U.S. Two other regulatory stories stood out this week. The IRS Commissioner Charles Reddeg admitted that standard crypto reporting rules would, quote, absolutely, help close the tax gap, which is the amount of U.S.

taxes owed that have yet to be paid. Blockchain forensics firm CipherTrace, which Disclosure is a previous sponsor of my shows, released software to help DFI protocols comply with the United States Treasury's Office of Foreign Assets Control. CipherTrays's new tool blocks OFAC-sanctioned blockchain addresses that might be associated with terrorist funding. I'm very curious to hear what opinion DFI protocol builders have of this software. Next deadline.

Fears over losing ground to China spark Bitcoin conversation in the U.S. According to a Bloomberg report, the Biden administration is troubled by the long-term effects the digital yuan may have on the strength of the dollar. China has already created and distributed its digital currency, a first for a major economy. If this topic interests you, be sure not to miss my interview last summer with historian Neil Ferguson and CoinDusks Michael Casey, which touched on this issue. As reported by Forbes, Michael Morrill, a former CIA director who spent 33 years at the agency, published an independent study, which concluded, number one, worries about Bitcoin as a tool for illicit finance are overstated. And number two, blockchain analysis is a highly effective tool to mitigate crime. His conclusions may catch the attention of Treasury Secretary Janet Yellen,

whose recent remarks have focused on how crypto could be used for money laundering or terrorist financing. He told Forbes, quote, We need to make sure that the conventional wisdom that is wrong about the illicit use of Bitcoin doesn't hold us back from pushing forward the technological changes that are going to allow us to keep pace with China. On C&BC, when asked about Secretary Yellen and Fed Chairman, Jerome Powell's approach to Bitcoin, Congressman Kevin McCarthy had some powerful words, quote, they tried to ignore it to make it go away. Those who regulate, those who are in government that make policy, better start understanding what it means for the future because other countries

are moving forward, especially China. I do not want America to fall behind. Next headline. Finance launches tokenized stock trading. Certain finance users can now purchase tokenized shares of Tesla. customers may buy as little as one-one-hundredth of a share with zero commission fees, although trading will be limited to regular trading hours. Notably, the tokens are not shares. They only give exposure to the asset, including dividends and stock splits. As of now, residents of the U.S., mainland China, Turkey, and other restricted jurisdictions are barred from buying stock tokens on finance. In an act of goodwill, finance announced it would also list coin as a stock token,

even though Coinbase does not offer B&B Binance's native token on its exchange. However, on early Thursday morning, Binance released a statement that its tokenized coin offering would be postponed due to market volatility. In related news, Wall Street bets open up its infamous Reddit thread to crypto, allowing for a discussion on Bitcoin, Ether, and Doge. Next headline. Hester Purse releases Safe Harbor 2.0. SEC Commissioner, Hester Perse, unveiled an updated version of her Safe Harbor proposal on Wednesday.

Purs has been working to give blockchain developers more freedom to build in defy without worrying about the ramifications, unintentionally or otherwise, of creating a token that runs a foul of U.S. securities law. Her proposal would give projects three years to determine whether a token should be deemed as security or not. This would allow developers to create a token offering very similar in nature to a security. and gradually evolve the project into a more decentralized entity, rather than launching with everything already buttoned up. Besides additional reporting requirements, including an exit report and outside counsel, Safe Harbor 2.0 remains similar to the initial proposal presented in February 2020.

In a nod to the open source ethos of crypto, purse posted the Safe Harbor proposal 2.0 on GitHub, where anyone can provide feedback via poll requests. Next headline, Ethereum Berlin Hard Fork is live. Ethereum's Berlin Hard Fork went live on Thursday, incorporating four Ethereum Improvement Proposals or EIPs to reduce gas fees and increase users' transaction capabilities. Berlin's launch takes Ethereum one step closer to this summer's London Hard Fork and EIP-1559, the controversial proposal that would likely have a deflationary effect on ETH. 50 blocks after the fork, Ethereum's network experienced a sinking error, disrupting major services. In response, Coinbase disabled ETH and ERC20 withdrawals, while Leisure admitted its users'

eth prices might not update. Sinking issues aside, the Berlin upgrade seems to have been met with approval as Ether reached a new high of $2,400 on the day the fork launched. Along with the network upgrade and new all-time high, two other headlines point. towards a continued bull run for Ethereum. First, CoinDesk reports the total value locked on Ethereum 2.0, surpassed $8 billion earlier this month, making Ethereum 2 the fifth largest proof-of-stake network by staked value. And number two, on Tuesday, Ethereum-focused Venture Studio Consensus

raised $65 million from JPMorgan, MasterCard, and UBS, to bridge the traditional finance and defy gap. Time for fun bits! Coinbase pays homage to Satoshi. Satoshi famously coded a message into the Bitcoin Genesis block. It reads, The Times 3rd of January 2009, Chancellor on Brink of Second bailout for banks. Bringing the origins of crypto full circle, Coinbase embedded a similar message on the Bitcoin blockchain to commemorate its listing day.

It reads, The New York Times 10th of March 2021. House gives final approval to Biden's $1.9 trillion. pandemic relief bill. Next, fun bits. New York Stock Exchange mints an NFT, and nobody cares? In a week where Coinbase listed at $50 billion plus, while Bitcoin and Ether hit all-time highs, the New York Stock Exchange, somewhat ironically, released a collection of NFTs commemorating a company's first trade, saying, quote, innovation is what we do at the New York Stock Exchange. Hayden Adams, the founder of Uniswap, put that innovation in context, tweeting.

New York Stock Exchange, 2,800 trading pairs in 228 years. Uniswap V2, 36,000 trading pairs in one year. But hey, they made some NFTs. Rocket emoji. Next, fun bits. Lily, a three-year-old reporter extraordinaire, interviews Michael Saylor. If you haven't seen the video of the three-year-old Lily interviewing Microstratology CEO Michael Saylor, I think you should check it out.

As a journalist, one question I was especially impressed by, and remember, this is a three-year-old girl, was when she asked Michael. My next question is, investing $2 billion in Bitcoin is a ballsy move. What's next for you? All right, thanks for tuning in to learn more about Gill and Coinbase. Be sure to check the links in the show notes. Follow Unchained on Twitter at Unchained underscore Pod. You can find all sorts of content ranging from my weekly newsletter to updates on my upcoming book, and a whole lot more. Unconfirmed is produced by me, Laura Shin, with help from Anthony Youne, Mark Murdoch, and Daniel Nuss. Thanks for listening.