In early September, Coinbase Global's (COIN -5.85%) CEO, Brian Armstrong, appeared on CNBC to discuss his company's management of the crypto winter, his thoughts about particular cryptocurrencies, and where he thinks the market is headed in the coming months.
Armstrong has been at the helm of Coinbase since he founded the company in 2012. Since then, the cryptocurrency market has gone through numerous boom-and-bust cycles. When Armstrong started his business, Bitcoin (BTC -2.26%) traded for less than $15. Today, it is hovering around $20,000, and Armstrong's net worth is believed to be around $2 billion.
A challenging time, but there is reason for hope
Just because Armstrong is the CEO of one of the most popular cryptocurrency exchanges doesn't mean he knows exactly what will happen next in the crypto market. But he has been around since just about the beginning of cryptocurrencies and has managed to keep his company afloat regardless of economic conditions. So when he shares his thoughts on the market today, people inevitably listen.
In the CNBC interview, Armstrong was asked about the current crypto environment and what it could look like once it returns to healthier levels. Most notable were his comments on a transition from primarily retail investing in crypto to larger institutions now joining in.
Armstrong believes that one particular sector will drive the next wave of crypto adoption: big tech. He cited the agreement between Coinbase and the world's largest asset manager, BlackRock (BLK -0.72%). In the agreement, the latter's investing software will integrate directly with Coinbase so BlackRock clients can purchase Bitcoin seamlessly. Armstrong thinks that more and more companies will follow this business model in the future. Since these large companies typically have more money on hand than retail investors, he is optimistic that this influx of capital entering the crypto market could send it to heights we have yet to see.
But until then, Armstrong's company faces an uphill battle as investors shy away from risky assets like cryptocurrencies due to poor macroeconomic conditions. Coinbase primarily generates profits from the transaction fees it charges for trades. With less trade volume, Coinbase's profits are taking a severe hit.
He was asked about when he sees the current crypto winter ending. He said that this one is a little different from other crypto winters in the past since it "happens to coincide with the broader macro environment coming down." He was mainly referring to rising inflation and climbing interest rates.
Armstrong hopes that the macro environment improves in the next 12 to 18 months, allowing crypto to have a "nice recovery."
The main takeaway
Investors shouldn't hang on to every word that comes out of the mouths of billionaires, but they should consider these statements when making decisions because they may contain valuable insights. Armstrong does have more experience in the crypto industry than just about anyone else, and his knowledge can be helpful in gaining more perspective on the sector's current position.
Armstrong believes that there are cycles when it comes to crypto, similar to the stock market. The incredible growth that the sector experienced from 2020 to 2021 was not sustainable, and it was inevitable that some sort of correction would follow.
Suppose Armstrong is correct, and the market is in for a lackluster performance over the next year and a half. In that case, that means now could be the time for investors to take advantage of incredibly discounted prices in preparation for a return to a healthier market.
