Coinbase, Robinhood Lead Crypto's Future

CRYPTO
Coinbase, Robinhood Lead Crypto's Future

The final quarter of 2024 saw cryptocurrencies skyrocket, with Bitcoin breaching $100,000 following Donald Trump's election and a crypto-friendly Congress. While Bitcoin has slightly retreated in late December, the broader crypto landscape remains bullish. Factors fueling optimism include Wall Street's embrace of crypto, the popularity of ETFs among retail investors, the SEC’s retreat from aggressive enforcement, and anticipated pro-crypto legislation in Washington. Two companies uniquely poised to benefit are Coinbase and Robinhood.

Both firms, which went public in 2021, have weathered volatile trajectories. After early success, they faced steep declines in 2022 amid macroeconomic challenges and crypto scandals, losing over 80% of their value and undergoing layoffs. However, 2024 has seen a turnaround. Coinbase shares surged 60%, while Robinhood’s quadrupled, thanks largely to Q4’s crypto rally and favorable political developments.

Despite their differences—Robinhood’s stock and options trading roots versus Coinbase’s crypto-native focus—the two companies are increasingly overlapping. Robinhood has aggressively expanded its crypto offerings, launching a noncustodial wallet and growing its crypto revenue stream. Meanwhile, Coinbase has strengthened ties with traditional finance, serving as a custodian for ETF providers and offering stablecoin accounts. This convergence positions both firms to thrive as crypto and traditional finance integrate further.

The immediate crypto boom will likely deliver substantial trading revenues, with Q4 earnings expected to reflect the recent frenzy. Historically, crypto markets experience prolonged downturns after such rallies, but structural shifts—like the rise of stablecoins—offer long-term growth potential. Stablecoins, expected to anchor global commerce following U.S. legislative support in 2025, represent a significant opportunity for both companies.

Coinbase stands to gain from its Base blockchain and offshore derivatives platform, while Robinhood can leverage its European crypto initiatives and ventures into prediction markets. Both companies are evolving beyond their reliance on trading trends, positioning themselves as leaders in the new era of global crypto finance.

TECH
Alibaba Slashes AI Model Prices

Alibaba has announced price cuts of up to 85% on its visual language model, Qwen-VL, through its cloud computing division, Alibaba Cloud. This aggressive move underscores the intensifying competition among Chinese tech giants to dominate the burgeoning AI market.

Qwen-VL, designed to process and understand both text and images, forms part of the large language model (LLM) ecosystem. These AI models, trained on vast datasets to generate humanlike responses, are the backbone of generative AI systems like ChatGPT. Alibaba’s decision to slash prices follows earlier reductions on its AI products, including a 97% cut in May for its Qwen AI model.

Major Chinese firms like Tencent, Baidu, and Huawei have also joined the race, developing their own LLMs over the past 18 months. Unlike consumer-focused AI chatbots, Alibaba targets enterprise users, with its Qwen models already deployed by over 90,000 businesses. This strategy aims to solidify Alibaba’s position in China’s competitive AI landscape.

FINANCE
Credit Card Debt Hits Crisis Levels

Americans are increasingly struggling to keep up with credit card bills, raising concerns for the economy. Banks are now writing off credit card debt at levels not seen since 2010, a time when the nation was recovering from the financial crisis and Great Recession.

Through the first three quarters of 2024, banks charged off $45.7 billion in credit card debt, a 46% increase from the same period in 2023, according to FDIC data. The surge, first reported by the Financial Times, highlights the toll of persistent inflation and elevated borrowing costs.

Credit card balances grew by $24 billion in Q3 2024, totaling $1.17 trillion—an 8.1% annual increase. Although inflation has cooled to 2.7% in November, elevated prices and the Federal Reserve’s prior rate hikes continue to strain consumers. In the year ending September, Americans paid $170 billion in credit card interest.

As holiday-season spending and President-elect Trump’s tariff policies loom, relief may remain elusive, further stressing household budgets.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.