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Coinbase CPO and COO Reveal Plans to Combat Unfavorable Market Conditions

The recent crash of the cryptocurrency market seems to have affected Coinbase. The leading digital asset platform will reportedly stop hiring employees for two weeks, freeze some business projects, and cut down its spending on Amazon Web Services.

Coinbase Temporarily Hits the Brakes

The past several weeks and months didn’t go well for the cryptocurrency market, with declining prices across all charts, and this harmed some of the largest companies in the industry. One of them was Coinbase, which reported Q1 2022 losses in excess of $400 million.

Somewhat expectedly, these developments led to a substantial change of direction for the largest US-based exchange, which said recently that it had to slow down on new hirings.

According to a report by The Information, the company has indeed followed through on this and will stop employing new staff for the next 14 days. The exchange will also halt certain business endeavors and reduce its spending on Amazon Web Services.

“This slow down will also force us to be more rigorous in our prioritization. We’re in a strong position — we have a solid balance sheet, and we’ve been through several market downturns before, and we’ve emerged stronger every time,” said Emilie Choi in a letter obtained by The Information – President and COO at Coinbase.

The firm also intends to compensate its employees by giving them stock grants. Last year, Coinbase started trading on Nasdaq, becoming the first major exchange to have its shares publicly traded. Upon launch, COIN traded at nearly $400, while currently, it hovers around $67.

The slowing hiring spree goes against the company’s ambitions to triple the team size. During Q1 2022, Coinbase hired 1,200 employees, bringing the total number to over 5,000. By the looks of it, the future condition of the crypto market will play a vital role in how the expansion will develop throughout the year.

CPO’s Statement on the Matter

Surojit Chatterjee – Chief Product Officer at Coinbase – also weighed in on the company’s plans for the short-term future. The executive tweeted that the exchange will direct its attention to “critical revenue-generating products.” Such offerings include retail and institutional services, as well as staking.

The executive further disclosed that Coinbase will strengthen its team’s discipline and look for enhanced efficiency:

“Lastly, I called on our teams to: rigorously prioritize core initiatives for highest impact, improve efficiencies, and ensure all our projects are set up for long-term success.”

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Coinbase Establishes Think Tank for Increasing Lobbying Efforts With Regulators

As global regulators are ramping up forces targeting digital asset firms, Coinbase announced the launch of a global crypto-native think tank that aims to accelerate research on the industry and hold constructive discussions with policymakers.

Coinbase Institute

The blog post by the largest US-based crypto exchange stated that the newly established think tank, Coinbase Institute, will focus on four major areas. On top of conducting in-depth research on crypto and Web3 and collaborating with thought leaders and policymakers, it will also promote crypto-oriented knowledge to the public and partner up with academic institutions.

The think thank has collaborated with the University of Michigan and formed the Coinbase Institute Advisory Board. Also, it will publish a monthly insight report on the digital assets market.

The firm asserted that the latest fluctuations in the wider market had not changed its long-term goal of working with regulators and broadening the adoption of crypto assets:

 “Despite the recent market noise, comprehensive data and analysis about crypto’s adoption over time will provide the public, policymakers, regulators, and academics with a better understanding of crypto’s diversity and interconnection to the overall economy.”

Coinbase’s Lobbying Efforts

As noted by Reuters, the latest move by Coinbase is to reinforce its lobbying efforts in engaging with regulators, and policymakers, even though it did not specify any policy goals it aimed to advocate by launching such a research-based institute.

Hermine Wong, the former SEC regulator who now works as the director of the institute, said there is no limit regarding how far the newly-launched initiative may evolve into:

“We’re interested in every area of research that involves the crypto economy and how it is interdisciplinary, how it is connected to our global economy, and so there’s nothing that’s going to be off limits.”

Reuters added that Coinbase spent $785,000 on lobbying policymakers in the U.S. last year.

As reported by CryptoPotato, Coinbase formed the Crypto Council for Innovation along with Fidelity and Block to “lobby policymakers and serve as the burgeoning industry’s voice in championing the economic benefits of digital currencies and related technologies.”

The coalition was one of many that functioned to ensure the proper implementation of crypto regulations.

Featured Image Courtesy of FT

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Coinbase Announces Web3 Functionality to Small Subset of Users

Coinbase announced facilitating access to Ethereum-based decentralized applications directly through the Coinbase app.

This update will enable eligible app users to purchase NFTs on marketplaces such as the recently launched Coinbase NFT or OpenSea, trade on decentralized exchanges, and start borrowing, lending, or swapping through DeFi platforms like Compound.

Web 3 on Coinbase App

As revealed by Coibase’s director of product management Rishi Dean, the Web 3 capabilities on Coinbase’s new dapp wallet and browser are operated with multi-party computation (MPC) technology that enables users to have a dedicated on-chain wallet. If they lose their device, the key to the dapp wallet is protected from any compromise, and Coinbase can assist in recovery.

Currently, the new dapp wallet and browser experience are only available to select Android users in the United States, but the company plans to deploy the functionality to all customers in the coming days. Dean stated,

“We want to enable everyone to seamlessly and safely participate in web3, and today’s launch is another step on that journey. We’re rolling out the new dapp wallet and browser experience in the US on Android first to a small subset of users, and plan to expand to all users and platforms soon.”

Coinbase launched the beta version of its highly anticipated NFT marketplace last month. During the initial announcement, the exchange stated that the new product is more than “just buying and selling,” with the end goal being – building a “socially-engaging community around creators and collectors.”

Lackluster Q1 Results

According to the recently published Q1 earnings report, Coinbase appears to be struggling amidst a chaotic phase in the cryptocurrency market.

The exchange reported net losses of $430 million while revenues slumped 35% year on year to $1.16 billion. Its already depressed stock plummeted further beneath the $100 per-share level. Today, Coinbase’s COIN shares opened at $61.7, over a 9% decline from yesterday’s closing price.

Despite the company’s performance, CEO Brian Armstrong is bullish on the long-term technicals. He reassured the customers that Coinbase has no risk of bankruptcy, as some feared, over a 10-Q disclosure filing with the Securities and Exchange Commission (SEC) and that the disclosure came in response to new rules by the regulatory agency.

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Coinbase Slows Hiring Efforts Amid Market Concerns and Disappointing Q1 Numbers

In recent years, Coinbase has made a reputation as the bread-and-butter of crypto trading platforms – commanding a higher price for its services in exchange for institutional investment opportunities, a user-friendly, easy-to-use platform, and so on.

However, no number of big-league investments can insulate a company from the industry it belongs to – and with crypto investors currently navigating rather choppy waters, it appears that Coinbase is following suit.

A Slump In Trading Volume Equals a Decline in Revenue

While trading platforms such as Binance or Kraken rely more heavily on staking and other ways of garnering revenue to turn a profit, Coinbase is notorious for betting on transaction fees to keep their business rolling.

The downside of this model is that when times get tough, HODLers tend to double down – while many day traders become increasingly wary of market conditions, content to wait for better opportunities.

As a result, the predominantly bearish market of Q1 2022 led to a disappointing quarterly report and an all-time low of COIN, Coinbase’s publicly traded stock.

Coinbase Prioritizes Consolidation Over Expansion

Overall, Coinbase remains in good shape. Despite ominous wording in the recent 10-Q disclosure filing, Brian Armstrong – the CEO of Coinbase – stated that the company is nowhere near bankruptcy, and assured investors their funds remained secure. Although the exchange seems perfectly capable of weathering the current storm, it had to put certain planned moves on hold.

In a recent memo, Emilie Choi, the President and COO of Coinbase, revealed temporary changes in the firm’s hiring policy and growth projections.

After emphasizing the importance perpetual expansion still holds for the company, Choi went on to say that Coinbase will be slowing down its hiring efforts for the time being.

Despite plans made in 2021 to triple the size of the company, the current situation has led Coinbase leadership to allocate resources meant for its expansion to “higher-priority business goals.”

Coming Back Stronger

The memo ends on a more positive note, stressing the importance of quality onboarding for new hires. It also promises a spectacular return to form in short order, as proven by Coinbase leadership’s glowing track record during the past 10 years at the helm.

“Big picture: We know this is a confusing time and that market downturns can feel scary. […]. We plan for all market scenarios, and now we are starting to put some of those plans into practice. We’re in a strong position — we have a solid balance sheet and we’ve been through several market downturns before, and we’ve emerged stronger every time.”

With a robust team of industry leaders already on board, Coinbase looks well on track to make a speedy recovery once the dust settles.

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Bitcoin Coinbase Premium Dumps to 3 Year Low

The BTC premium on the largest US-based cryptocurrency exchange has plummeted to negative levels last seen nearly three years ago. This comes amid the broader market correction and suggests that whales and larger players have used Coinbase to sell substantial portions of their bitcoin holdings.

Bitcoin Coinbase Premium Dumps Hard

The blockchain analytics company CryptoQuant compares the BTC price on two of the largest crypto exchanges – namely, Binance and Coinbase – against Tether and USD, respectively, to determine whether there’s a difference, labeled “Coinbase Premium.”

This metric tracks the BTC movements of institutions and larger-cap players (whales) on Coinbase (and Coinbase Pro), typically regarded as the go-to platform for such investors. Essentially, this means that the higher this Premium goes, the more institutional demand exists, and vice-versa.

According to CryptoQuant, this metric has fallen sharply since the start of the month. It was well in the “green,” as the chart below demonstrates, for consecutive months, but dropped to its lowest position in 35 months. The analytics resource attributed it to larger investors disposing of their assets on Coinbase.

Bitcoin Coinbase Premium Index. Source: CryptoQuant
Bitcoin Coinbase Premium Index. Source: CryptoQuant

CryptoQuant’s analyst wrote:

“Financial markets are currently trading risk-off, so this is not surprising. I would expect investors from the traditional finance sector, in particular, to reduce exposure to bitcoin in such a situation.”

The Bitcoin Meltdown

The Coinbase Premium Index turning negative came as the entire cryptocurrency market, led by BTC, headed straight south. Just a few days after the first signs of significant sales on Coinbase, the primary digital asset dumped by $4,000, from $40,000 to $36,000.

However, its price kept tumbling in the following days, resulting in a massive price drop to $25,300 (on Bitstamp) earlier today. This became BTC’s lowest price point since late December 2020. The alternative coins are in even worse shape with double-digit declines.

This only supports the theory that whales and institutions were most likely the fuel behind the recent correction. As such, it would be intriguing to follow how the Coinbase Premium will perform in the next week or so.

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Coinbase CEO Blames RBI for Botched India Launch

Coinbase Co-founder and CEO Brian Armstrong squarely blamed the Reserve Bank of India (RBI) for employing “informal pressure” and denying the Unified Payments Interface (UPI) services that led to Coinbase halting its trading services three days after the launch on April 7.

Coinbase India Launch Experience

Speaking for the first time on the issue, Armstrong explained what led to the suspension of the company’s services in India and how it plans to stage a comeback. During the Q1 2022 earnings call, he said:

“So a few days after launching, we ended up disabling UPI because of some informal pressure from the Reserve Bank of India, which is kind of the Treasury equivalent there,” he explained in response to a question from Anil Gupta, VP, Investor Relations, Coinbase.

Coinbase, which maintains a technical hub with about 300 staff in India for over a year and is planning to hire another 1,000 staff this year alone, launched its trading services on April 7, 2022, in Bangalore in the presence of CEO Armstrong.

But within three days, the Nasdaq-listed crypto trading platform had to suspend its services for Indian investors after the instant retail payments services UPI was denied by the RBI-controlled NPCI.

The Coinbase co-founder and CEO reached India a week before the launch of its trading platform. He also informed the readers through a corporate blog on Medium that Coinbase Ventures would be meeting with startup founders to explore investment possibilities in crypto and Web3 domains.

“And India is a unique market, in the sense that the Supreme Court has ruled that they can’t ban crypto, but there are elements in the government there, including at Reserve Bank of India, who don’t seem to be as positive on it. And so they — in the press, it’s been called a “shadow ban,” basically, they’re applying soft pressure behind the scenes to try to disable some of these payments, which might be going through UPI.,” Armstrong added.

Re-Launching in India a Priority

After detailing what happened in India and how RBI’s informal pressure is a violation of the Supreme Court ruling, Armstrong said his priorities include an upcoming relaunch.

“But I think our preference is really just to work with them and focus on relaunching. I think there’s a number of path that we have to relaunch with other payment methods there. And that’s the default path going forward. So my hope is that we will be live back in India in relatively short order, along with a number of other countries, where we’re pursuing international expansion similarly,” he summed up his India experience.

Experience in Compliance and Regulation

Active in over 100 markets, the second-largest crypto exchange by volume claims to have an extensive understanding of the complications involving compliance and regulation.

Drawing on its experience, in April 2022, the company launched Coinbase Intelligence, a suite of crypto compliance tools for businesses and law enforcement agencies. These transaction screening tools provide real-time monitoring and alerts for better risk management.

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Coinbase Faces No Risks of Bankruptcy Despite Market Crash and Disappointing Q1 Results, Says CEO

Following recent events in the crypto market, Coinbase CEO Brian Armstrong has put customers’ minds at ease by reassuring them that the US crypto exchange currently has no risk of bankruptcy, as some feared.

Coinbase Posts Worse Than Expected Q1 Earnings

As reported earlier, Coinbase shares (COIN) fell by 16% in after-hours trading on Tuesday after the company released a worse-than-expected Q1 earnings report.

The exchange suffered a 44% drop between January and March, which led to a net loss of $430 million during the period. The Q1 results saw the company’s year-to-year revenue drop 35% to $1.16 billion from an expected $1.5 billion.

With Coinbase deriving more than 85% of its revenue from crypto transactions, the company said the poor Q1 earnings report was caused by the falling crypto markets and the increased volatility since the start of the year.

Coinbase Files New Disclosure

In its Q1 report, the leading US crypto exchange mentioned a new 10-Q disclosure filing with the Securities and Exchange Commission (SEC).

The disclosure revealed that customers could be treated as “general unsecured creditors.” In other words, if Coinbase ever declares bankruptcy, customers might lose all the cryptocurrencies stored on the exchange as they would be the last in line to make claims.

The new filing, as expected, caused an uproar among Coinbase customers since their funds would become inaccessible in the event of bankruptcy. The black swap event in the market and the company’s Q1 loss also contributed to the panic among users.

Armstrong: We Have No Risk of Bankruptcy

Armstrong took to Twitter on Wednesday to explain the new filing to customers while reassuring them that their funds are safe with the exchange despite uncertain market conditions.

The Coinbase boss said the firm had no risk of bankruptcy and that the 10-Q filing was based on SEC requirements.

“We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties,” Armstrong said.

He further noted that the disclosure “makes sense” because such legal protections are yet to be tested in court for cryptocurrencies.

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Coinbase Shares Plunge as Company Reports Q1 Losses of $430M

The exchange’s trading volumes fell around 44% between January and March as it reported worse than expected earnings for the period.

Crypto markets were largely range-bound for Q1 with few opportunities for short-term traders, resulting in the exchange volume slump. Coinbase derives as much as 85% of its revenue from above industry average transaction fees, so that decline has directly impacted its profit for the period.

On May 10, the company reported net losses of $430 million, far greater than the $47 million expected by Wall Street analysts, according to the Financial Times.

Coinbase Revenue Slump

Revenues fell 35% year on year to $1.16 billion, way off analyst expectations of around $1.5 billion. The firm blamed the falling crypto markets and increased volatility in 2022 but remained optimistic for the future:

“We believe these market conditions are not permanent and we remain focused on the long term.”

Revenue derived from transaction fees still made up the lion’s share of the total at 87%. The rest came from subscriptions and services.

Its crucial monthly transacting users (MTU) figure had fallen to 9.2 million, which is nearly 20% lower than in Q4, 2021. This was also lower than analyst expectations of 9.5 million. Earlier this month, CEO Brian Armstrong predicted that there will be a billion crypto users in the next decade.

Trading volume on the platform fell from $547 billion in Q4 2021 to $309 billion for the first quarter of 2022. Of this total, just 24% were retail traders, with the vast majority being institutional. It reported that institutional trading volume was $235 billion, a decrease of 37% compared to Q4.

The number of assets on the platform also fell by 8% for the period. At the end of Q1, funds on the platform were $256 billion, down from $278 billion at the end of Q4. “The sequential decline was driven by lower crypto asset prices, partially offset by billions of dollars in net inflows,” the report explained.

COIN Slumps to ATL

Coinbase stock has fallen to an all-time low as a result of the worse than expected earnings report. COIN was down 16% in after-hours trading Tuesday after sliding about 13% in the regular session.

The share price is currently $61.55, according to MarketWatch. It has now tanked 84% from its all-time high of over $400 when it went public in April 2021.

Crypto markets have tanked around 50% over the same period from their all-time high. Total market capitalization currently stands at a ten-month low of $1.47 trillion.

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Our Ambition is to Become the Amazon of Crypto: Interview with Coinbase’s Guillaume Chatain

After spending almost a decade working for the Wall Street behemoth – JPMorgan Chase & Co – Guillaume Chatain took the leap towards blockchain and crypto, where he helped establish a regulated digital broker-dealer.

As of now, he is the Head of EMEA (Europe, Middle East, and Africa) Sales at the leading US-based cryptocurrency exchange – Coinbase – a position which he occupies for over a year.

From JP Morgan to Coinbase: The Future of Finance

Chatain made a huge transition in his professional life. His previous company, for almost ten years, was none other than JP Morgan – the international banking giant spearheaded by Jamie Dimon.

Dimon was known for his particularly skeptical view of cryptocurrencies and, at one point, made headlines calling Bitcoin “a fraud.” However, he later apologized for this but remained relatively critical of the industry as a whole.

So, in the end, what was it that made Chatain leave JPM for Coinbase?

“When I was at JP Morgan in 2016, I started to read a lot about blockchain. For every piece of research, I was taking it, printing it, and reading it.

I really thought this was going to be the future of finance. This is what was going to be helping to remove a lot of friction and a lot of intermediaries that are present in the world of traditional finance.” – He told us as we met in France for Paris Blockchain Week.

Being between the two worlds, Chatain ultimately decided to leave Hong Kong for London and began working on his own idea of a marketplace for structured investments that would be managed by smart contracts. However, he admitted that this was too early for its time back then:

“I spoke with the regulator in the UK because I thought if the regulator is not on board, it’s never going to work. And the FCA in the UK basically said, “That’s a great idea. Why don’t you come to build and do the first test as part of our FCA regulatory sandbox?”

Staying true to his path, though, Chatain turned the page. It was then he decided to join Coinbase, where he now occupies the position of Head of Institutional Sales for Europe, the Middle East, and Africa.

“From an institutional point of view, it’s very important for European clients to have a counterparty with a caliber of Coinbase.”, he explained the expansion of Coinbase to Europe.

“I’m talking about a company that is publicly listed, a company that has proven over its nine years of existence that we are very good at safekeeping clients’ assets. We can do it at scale without ever losing their money.”

“We’re also offering to our clients a full prime broker experience that goes beyond a simple access to Coinbase liquidity.  We give our institutional clients access to a pool of liquidity that consists of multiple regulated exchanges and OTC counterparties, and we offer additional services such as financing, borrow, lending, analytics, and staking directly from cold storage” he said.

Despite the somewhat reserved stance on crypto from UK regulators, the region is among the most active in terms of institutional adoption, said Chatain.

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Guillaume Chatain. Source: Structured Retail Products

The Institutions Are Here

Since 2018, the phrase ‘the institutions are here’ has been used by crypto proponents almost every year. However, is it like this in 2022? The Head of EMEA Sales at Coinbase, who deals only with institutional clients, Chatain, shared with us:

“I can tell you that institutions are here, present. I’m dealing every day with corporate institutions like high-net-worth individuals and family offices, hedge funds, asset managers, and large corporates. We 10x’ed our institutional trading volumes last year.

We’re in a very lucky position of having so many inbound requests that we don’t have the bandwidth with my team, which by the way, grew 4x.  And we still have to prioritize the largest opportunities over smaller corporations in terms of onboarding.  Institutions in general kee showing a lot of interest.”

Life Following the Coinbase IPO

Coinbase made history last year when it became a publicly-traded company. Chatain asserted that the move

img2_rocketreach
Guillaume Chatain. Source: RocketReach

helped legitimize not just the firm but also the industry. As such, with the added transparency as a public company, the number of institutions seeking business relationships with Coinbase grew.

“One example is a company, a trading company who contacted us immediately after the public listing and saying like, “We’re just waiting for the company to be public to start engaging.” And since then, we have onboarded them.

So it’s been very positive in general as part of my day-to-day discussions with new prospects, just mentioning that we are listed, it makes a difference.”

Chatain also explained that Coinbase raised capital through a convertible bond following the listing. A few months down the road, the firm raised more funds through a 10-year bond, which was ” oversubscribed.”

Being able to access capital markets or the bond market is really showing that you have a lot of investors that believe Coinbase is going to be there for ten years, for the next ten years, and are willing to put some money in there. I think that’s even more significant than being a listed company.”

The Coinbase Culture

Chatain also emphasized the transparent corporate culture at  Coinbase.

“Whatever you read on the Coinbase blog, whatever Brian (Armstrong, Coinbase’s CEO) is writing in his own papers, is super transparent. And when you start working at Coinbase, it’s exactly what is written on paper. So, that was very refreshing when I started.”

And what about Coinbase as a flat organization? “Coming from a bank like JP Morgan where everything is so huge that you have some access to top management, but it happens very rarely. At Coinbase, we have corporate meetings every couple of weeks, and Brian is always present. He’s always talking, and he is always super prepared and very transparent in what he’s doing, so I really love that.”

Brian Armstrong
Brian Armstrong, Coinbase CEO

Becoming the Amazon of Crypto

Undoubtedly, one of the most heavily-discussed topics within the community is Coinbase’s listing process for new coins. To this, Chatain emphasized the company’s transparent approach and said:

“I would say to any founder that wants to list his token to go to Coinbase’s Assethub. Something that I love about Coinbase is we’re just transparent about everything: all the rules and the listing criteria are there.

Our ambition is to become the Amazon of crypto – offering all the crypto tokens that are available, as long as we’re authorized to do that from a security as well as a legal point of view.”

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A Third of All Britons Have Now Used Crypto, Says Coinbase Report

Crypto adoption in the United Kingdom continues to rise, with a reported 33% of the country’s consumers having previously invested in such assets. The figure is up 4% from six months prior, and is second in Europe only to the Netherlands’ whopping 47% statistic.

Britons Buying Bitcoin

The stat was gleaned from a bi-annual analysis conducted by Qualtrics, on behalf of cryptocurrency exchange Coinbase. It found that 61% of Britons who already own cryptocurrency plan to increase their positions within a year, up from 54% in October 2021.

Of that group, about two-thirds plan to increase their position in the cryptocurrency they are already holding, versus just 23% that wish to expand into new assets.

This is perhaps a reflection of the “tribalism” in the crypto space noted by Ripple’s CEO last month. Many Bitcoiners, for instance, prefer to stick to Bitcoin exclusively, viewing other coins as fundamentally different or invaluable.

At present, Bitcoin and Ethereum are still the most commonly owned cryptocurrencies, possessed by 75% and 52% of holders respectively. Interestingly, Dogecoin comes in third (34%) ahead of Binance Coin (33%), despite being only the 12th largest crypto by market cap right now. This is likely a reflection of Dogecoin’s notoriety, which Grayscale finds second only to Bitcoin.

Other European countries reported less crypto investment overall, with the UK’s ownership figures ahead of Spain (26%), Italy (25%), Germany (24%), and France (17%).

“Recent survey work suggests that the adoption trend may continue, with many sharing ambitions to expand the size and diversification of their portfolios,” said a Coinbase spokesperson, according to CoinTelegraph.

Gauging Consumer Understanding

Coinbase also measured the perceived understanding that consumers had of various crypto assets. About 11% of those surveyed thought they well understood cryptocurrencies beyond Bitcoin alone – a strikingly similar figure to those who thought they understood traditional investment assets (13%).

In fact, it’s possible that crypto understanding is not lacking, but simply generational. Billionaire hedge fund manager Paul Tudor Jones said as much in a recent interview, where he said he’s “long” on crypto due to the “intelectual capital” entering the industry from colleges today.

According to a CNBC survey from last year, most millennial millionaires are already invested in cryptocurrencies. An Ipsos poll from earlier this week also showed a significant age gap among Americans that prefer to use crypto for payments.