Coinbase Wallet, Brazil Payments, & Bitcoin's Last Stand?

Bitcoin and crypto broadly have been brought down a peg or two this year. Many networks won't survive, others are just getting started FUD be damned.

Coinbase announced yesterday that it will be discontinuing support for Ripple (XRP-USD), Stellar (XLM-USD), Bitcoin Cash (BCH-USD), and Ethereum Classic (ETC-USD) from its Coinbase Wallet application. There is a key distinction that needs to be made here; Coinbase Wallet and Coinbase Exchange are not the same products. Users of Coinbase Exchange will still be able to purchase XLM, BCH, and ETC - Coinbase Wallet is a non-custodial application and the software developers maintaining Coinbase Wallet simply won’t be integrating with those assets any longer.

The fact that Coinbase Wallet won’t be supporting BCH or ETC isn’t terribly surprising. Those chains have been positioned as alternatives to the Bitcoin Core (BTC-USD) and Ethereum (ETH-USD) chains but have largely failed to garner much interest from the broader crypto community. Ripple isn’t to surprising either since the company is at war with the SEC and most exchanges don’t even offer it through custodial solutions. XLM is sort of surprising to me however.

Daily Transaction count: as of 11/30/22

If we look at network usage through daily transactions, XLM is actually used more than BTC, ETH, and XRP combined. Of course, the number of transactions isn’t always indicative of real value transfer - the other networks listed all have mean USD value sizes that are several thousand dollars. That isn’t the case for Stellar.

The Stellar blockchain is one of just eight that Circle has used for USDC integration and the mean transaction fee is well under a penny. Micropayments figure to be one of the low-hanging fruit utilities for public chains, so it’s interesting that Stellar isn’t used by more people. Stellar seems to be in a fantastic position to be an important layer in cross border settlement and/or online micropayments, but it isn’t.

Daily Active Addresses: as of 11/30/22

The daily active wallet addresses figures are now below Litecoin (LTC-USD) after being well above LTC from midway 2018 through 2020. Given the lack of active daily users and the immense level of daily transactions, it would appear the activity on XLM is either some sort of spoofing/bot behavior or something happening on chain that I’m missing.

Regardless, Coinbase Wallet won’t be supporting the chain anymore and I think that’s generally disappointing. Since Circle supports USDC on Stellar, a person working in the US could easily send remittances to countries in Latin America via USDC for under a penny. Self-custodial wallets are the ideal application for this kind of payment mechanism and more countries are warming up to crypto as a form of payment.

Brazil Crypto Payments

Brazil has just joined the wonderful world of legal crypto payments. Can November 2022 get any more interesting with the 2 hours we have left? Maybe. A caveat… making crypto “legal for payments” and “legal tender” are not actually the same thing. But this is a step in the right direction. Frankly, it’s no surprise that Latin American countries are charging ahead in the adoption of cryptocurrency. According to Decrypt:

Brazil has made considerable progress in terms of cryptocurrency regulation and adoption among investors. It is currently the country with the most cryptocurrency ETFs in Latin America, and most of the country's major banks and brokers currently offer some type of exposure to cryptocurrency investments or similar services like custody or token offerings. Even Itaú, one of Brazil's largest private banks is working to tokenize assets as part of its future pack of services to investors.

I have to mention that in addition to Brazil being yet another Latin American country warming up to crypto, it also happens to be one of the BRICS nations. I’ve mentioned the BRICS nations before in He Who Makes the Rules and in Crazy Like a Fox.

I don’t want to re-write either of those articles so the TL:DR recap goes something like this: Brazil, Russia, India, China, and South Africa are the BRICS nations. Those countries have an economic interest and the energy production capacity to force the issue on a new global reserve standard. So any time you see the words “crypto” and “payments” in a positive light with one of those countries, I think it’s wise to take note.

And this gets into the game theory of cryptocurrencies. What is or could be illegal in America or any other Western nation might not be illegal globally. Furthermore, if you buy the idea that public blockchains have a legitimate utility, the Western nations that have typically enjoyed the privilege of currency stability aren’t the only countries that are going to have a say in how this goes.

Bitcoin’s Last Stand?

This is a question asked by bloggers at the European Central Bank just today. It’s actually a fascinating read; not because the authors provide any actual analysis in an attempt to answer their own question from the headline, but because it reads like copypasta from any Nouriel Robini Bitcoin rant. We get the common anti-BTC tropes that we’ve seen for years:

• Bitcoin is used by criminals (bunk)

• It has no societal value (bunk)

• It’s wasteful of energy (complicated)

There are few rebuttals to each of these points that are as well thought out as this one from Bradley Rettler via Bitcoin Policy Institute. In one particularly fun section ripping an NYT opinion piece to shreds, Rettler points out how Paul Krugman, the village idiot of the financial elite, doesn’t seem to understand the fundamental ethos of why Bitcoin even exists because he is so blinded by his own financial privilege. That’s what this ECB blog reminded me of, especially with this part:

Firstly, these technologies have so far created limited value for society - no matter how great the expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it.

Again, financial privilege on display as this seems to be a mischaracterization of what value is. Value is entirely subjective. Bitcoin and the decentralization of cross border settlement infrastructure may not have value to European Central Bankers, but they have value to poverty wage earners sending remittances from the US to Latin America. They have value to people in Zimbabwe who used Bitcoin to escape the hyperinflation of the centrally controlled and managed domestic currency. I could go on but I don’t want to beat a dead horse. There is value in Bitcoin right now and the potential long term value of the network is immense.

By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's - Paul Krugman, 1998

Or maybe the financial experts will be right this time.

Disclosure: I’m not an investment advisor. I merely share what I do and why I do it. You shouldn’t take anything I say as investment advice and always do your own research when making investment decisions. Cryptocurrencies, tokens, STONKs, and digital trinkets could all go to zero. I have no job and I live in my wife’s basement. I’m the last person on the face of the earth who you should listen to for financial advice or life advice.