--- title: “That’s Our Two Satoshis” - The Impact of Coinbase and PayPal News on Crypto description: While the summer has been slow, and the market has traded sideways, two more significant events happened last week that went largely unnoticed - Coinbase’s launch of a Layer-2 and PayPal’s launch of a stablecoin. image: https://www.ar.ca/hubfs/TO2S%20375x175%20%283%29.png --- [![email-sig-logowhite](https://www.ar.ca/hs-fs/hubfs/email-sig-logowhite.png?width=102&height=96&name=email-sig-logowhite.png "email-sig-logowhite")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** [![Arca](https://www.ar.ca/hs-fs/hubfs/arca_square_576x576.png?width=60&height=30&name=arca_square_576x576.png "Arca")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** Search **Menu** ** ** [![Data Room](https://no-cache.hubspot.com/cta/default/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ![](https://www.ar.ca/hubfs/Blog/Thats%20Our%202%20Satoshis/Branding/2-Sats-Header.png) [Market Recap](https://www.ar.ca/blog/tag/market-recap) | # “That’s Our Two Satoshis” - The Impact of Coinbase and PayPal News on Crypto [![Jeff Dorman, CFA](https://www.ar.ca/hubfs/Jeff%20Dorman.png)](https://www.ar.ca/blog/author/jeff-dorman-cfa) Written by [Jeff Dorman, CFA](https://www.ar.ca/blog/author/jeff-dorman-cfa) Aug 14, 2023 ******![Thats Our 2 Satoshis Logo](https://www.ar.ca/hs-fs/hubfs/Thats%20Our%202%20Satoshis%20Logo.png?width=300&name=Thats%20Our%202%20Satoshis%20Logo.png)****** What happened this week in the Crypto markets? ![Screenshot 2023-08-14 at 8.28.18 AM](https://www.ar.ca/hs-fs/hubfs/Screenshot%202023-08-14%20at%208.28.18%20AM.png?width=1542&height=856&name=Screenshot%202023-08-14%20at%208.28.18%20AM.png) Source: TradingView, CNBC, Bloomberg, Messari   **Coinbase and PayPal** The investment theme of 2023, to date, has largely centered around Bitcoin and regulation. Bitcoin has had two major catalysts for growth  (the regional banking crisis, and the Blackrock BTC spot ETF application), while some regulatory “clarity” has come via court decisions and comments between the SEC and Ripple, Coinbase, and Grayscale. There have been a few other investment themes:   - Solana (SOL) seems to be somewhat back from the SBF-induced graveyard - Ethereum liquid staking derivatives continue to climb - AI-related tokens have seen a bump But for the most part investment returns this year have been driven by BTC’s strength, Ethereum’s growth, and in the equities of companies that feed off of these two (COIN, MSTR, RIOT, MARA, GBTC, etc).  Just about everything else happening in digital assets has either been deep-in-the-weeds infrastructure build-outs, or a VC-funded 5-10 year long-shot application of blockchain.    That changed last week. Two notable events from two of the largest companies in FinTech had market participants buzzing, even if it was once again not reflected in price action.    **Coinbase launched its Ethereum layer-2 scaling solution for all users called Base**.  Built-in partnership with another L2, Optimism (OP), Coinbase’s Base rollup is no half-hearted foist into Web3. Rollups are seen by many as the gold standard for security, and Optimism is one of the longest-standing efforts to scale Ethereum. In Coinbase’s own words, *“*[*Base*](https://base.org/)* is designed to be a faster, lower-fee alternative to the Ethereum network, while maintaining the main blockchain’s security. Transactions on Base cost less than 10 cents USD. It was built on Optimism’s open-source OP Stack and currently has over 100 decentralized apps (dApps). Over the last two weeks, around US$163M has been bridged over to Base.”*   ![](https://lh3.googleusercontent.com/geIbJaTOgAILzGuIsqDS34cUz5DEX5fM_5ZRda40SGsTDsv40bzIwZ7KslpjsOZvUjeZbQ7s5X52hVtNlkvVDROqJpQfduY58fwy5QStpX6tiv2y8xxqJ2pB-nJLVXqAJiGdpOCISLBY2TO0ZFW3dP0)   Coinbase is the first publicly traded company to launch its own public chain. Never have we seen something like this before, and it’s clear that  the equity analyst community has no idea how to value this product in terms of Coinbase’s growth (Arca’s own Nick Hotz does, however, as he wrote about [COIN as a sum-of-the-parts](https://www.ar.ca/blog/coinbase-stock-looks-cheap-as-a-sotp) back in February). That said, much like most of the events happening in 2023, it’s not an easy product for the average person to digest.  [Using Base is difficult](https://twitter.com/0x_Imperius/status/1690104612848594945?s=20) for the uninformed and for new blockchain users. But Coinbase has a large advantage here in terms of making this more user friendly.  For starters, most of Coinbase’s customers are still retail investors, so it has a long history of making blockchain products more friendly for newcomers.  Second, again, this is a multi-billion dollar public company with the ear of Wall Street and corporations from around the world and they work to integrate feedback from this community as well.  Coinbase launched “[Onchain Summer](https://onchainsummer.xyz/)”, a month-long festival that brings together 50+ collaborators, including Coca-Cola, Atari, and OpenSea. The big knock on blockchain has been a lack of usable consumer applications.  While there have been a few flash in the pans like the original game built by Axie Infinity (AXS), move-to-earn fitness apps like Stepn (STEPN), and NFT collectible games like NBA Top Shots (built on FLOW), most of the growth in blockchain has been in trading and financial applications.  If Coinbase can help onboard corporate developers, who in turn can create usable blockchain consumer applications, the next wave of growth may have already started.   **Fintech giant PayPal entered the stablecoin race with the launch of PayPal USD (PYUSD)**. The stablecoin will be issued by Paxos Trust Company, much like the Pax Dollar (USDP) and the once popular Binance USD (BUSD).  Paxos will custody the dollar reserves, which will be held in U.S. Treasuries and similar cash equivalents.    To understand how big of a deal this is, let’s first recognize and reiterate that US-dollar stablecoins may already be the “killer app” that blockchain technology was destined to create.  While Bitcoin is a $575 billion asset, stablecoins, collectively, are not far behind, with $125 billion in assets.  Not bad considering Bitcoin had a 10-year head start.  Moreover, stablecoins to date have been issued and marketed by small potato companies and DeFi applications, all of whom pale in comparison to PayPal, which boasts ~400 million active users.  While many in crypto hate PayPal since it is yet another middleman, its sheer size could shepherd millions of people into DeFi with its stablecoin. ![](https://lh5.googleusercontent.com/Tlggc1FPEunWEmVxdO7ZGCI7uDtQI_n2jJI44vAzvDrPJ9gUVPGuLPzngAbzcVDgED_KP18oRe_MmXijRbp6AmEGRtb1eBclNHZ5a_wuaqw5BQbiSBor0t_zIED-tMnx5l_3DQowF-tnqKXAXx6Dzlc)   If you already use PayPal’s services, here is how its stablecoin will affect you ([according to its press release](https://www.prnewswire.com/news-releases/paypal-launches-us-dollar-stablecoin-301894262.html#:~:text=SAN%20JOSE%2C%20Calif.%2C%20Aug,%2C%20PayPal%20USD%20(PYUSD).)).  You will be able to:   - Transfer PYUSD between PayPal and compatible external wallets – allowing you to send and receive into PayPal without using a bank - Send person-to-person payments using PYUSD - Fund purchases with PYUSD by selecting it at checkout - Convert any of PayPal's supported cryptocurrencies (BTC, ETH, BCH, LTC) to and from PYUSD Of these, transferring PYUSD to external wallets is likely the most impactful, as the other services are already pretty easy to use within PayPal’s existing fiat system.  Given expectations that PYUSD will be mostly used to facilitate payments and remittances, this could finally deliver on the promise to the “bank the unbanked”.   It’s hard to be bearish on Ethereum (ETH) this week when two behemoths, Coinbase and PayPal, have just built new protocols and tokens on the layer 1 network.  The muted market reaction, in my opinion, is a factor of a few hangover effects.   First, after the events of 2022, new investors are not going to get excited about “what could be”.  They want to see “what is”, and both Base and PYUSD will take some time to truly grow.  Second, financial markets have been trained to only care about “hockey stick growth”.  Last year, ChatGPT became the fastest-growing downloadable app ever, and then earlier this year, Facebook broke its record with its Threads rollout, achieving over 100 million downloads in just 4 days.  Twitter took roughly 3 years to do what Threads did in 1 day.  We (investors) get overly focused on things like ChatGPT, or Facebook Threads, and fail to see (or appreciate) the building blocks it takes for most other companies or applications to achieve that kind of growth.    Lastly, there just aren’t as many eyeballs focused on digital assets and blockchain these days.  When you’re not trying to find something, you often pass it by.  There are some [great examples](https://twitter.com/john_iller/status/1689665987866472448?s=46&t=e_HO6YZP2lhbFDHG5e0fKQ) of world-renowned violinists, and artists, and chefs going completely unnoticed when their skills are taken outside of a controlled setting.  If you’re not focused, you miss things.  And that is likely what is happening to most casual crypto investors.    We’ll see what types of impacts PayPal and Coinbase have on the market years from now.  But between Coinbase, Blackrock, PayPal, Visa and others, it’s likely we’ll be pointing back to these events as the catalyst that every investor in the world had plenty of time to digest before it was too late.       ***And That’s Our Two Satoshis! ****Thanks for reading everyone! Questions or comments, just let us know.*   **The Arca Portfolio Management Team** *Jeff Dorman, CFA - Chief Investment Officer* *Michael Dershewitz - Chief Operating Officer* *Katie Talati - Director of Research* *Sasha Fleyshman - Portfolio Manager* *David Nage - Portfolio Manager* *Wes Hansen - Director of Trading and Operations* *Michal Benedykcinski - Senior Vice President, Research* *Nick Hotz, CFA - Vice President, Research* *Kyle Doane - Vice President, Trading* *Robert Valdes-Rodriguez, CFA- Vice President, Research* *Alex Woodard - Associate, Research* *Christopher Macpherson - Research Analyst* *Andrew Masotti - Associate, Trading and Operations*       **To learn more or talk to us about investing in digital assets and cryptocurrency** **call us now at [(424) 289-8068](tel:+14242898068).** ### Subscribe For the Latest Blockchain News & Analysis     Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional. Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services. 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