Why Coinbase’s $375m Echo acquisition is a ‘major win’ for users

Coinbase’s Echo acquisition is fuelling excitement among crypto investors.

On Tuesday, the US-based exchange announced it had acquired the early stage investing platform for $375 million in a cash and equity deal.

The tie-up will likely unlock more and higher-quality opportunities, Amir Hajian, a researcher at crypto market maker Keyrock, told DL News.

It’s “a major win for users,” Hajian said. “Coinbase’s 100 million plus user base creates a powerful incentive for projects to launch there.”

Echo is one of several platforms that lets individuals invest in early-stage crypto ventures that are usually reserved for institutional investors.

“You can let specific communities invest a ranged amount at cheap prices,” Kasper Vandeloock, an angel investor and adviser to several crypto trading platforms, told DL News. “Normally it’s kind of the ethos to make Echo rounds cheaper as it’s for the community.”

“It democratises early-stage investing by flipping the traditional model by empowering communities rather than gatekeeping allocation among insiders,” Hajian said.

It comes as investors’ appetite to back crypto ventures has surged to its highest point since 2022. They have poured over $21.8 billion into projects so far this year, according to DefiLlama data.

Industry experts expect that appetite will only grow thanks to the US government’s pro-crypto policies.

The return of ICOs

Investments like the ones Echo facilitates can be extremely lucrative. Those who invested in Bitfinex’s Plasma blockchain on Echo last year were able to realise a 324-fold return when its XPL token launched in September.

But early-stage investing is also extremely high risk, even for the crypto industry.

“Seed stage stuff is really difficult to invest in,” Jordan Fish, Echo’s founder, said on X in July. “Lots of projects on Echo will go to zero. In fact, I would imagine that most things on Echo will go to zero.”

Platforms like Echo aren’t the first time retail investors have been offered access to early-stage investments.

In 2017, a type of crypto investment called an initial coin offering, or ICO, exploded in popularity. These offerings skipped the need for regulatory oversight by selling blockchain-based tokens instead of equity.

But the lack of regulation meant ICOs were mired with hundreds of dubious projects, if not outright scams. They were swiftly cracked down on by the US Securities and Exchange Commission.

Industry insiders say that there’s still a need for alternative funding methods.

“The industry needed alternatives to VC-dominated launches that treat retail as exit liquidity,” Matt O’Connor, co-founder of token offering platform Legion, told DL News. “Regulatory clarity in Europe through MiCA, and shifting sentiment in the US has created space for compliant public token sales again.”

In addition to Echo’s early stage investing infrastructure, the platform also has a token launch platform called Sonar, which is more similar to previous ICOs.

Coinbase said it plans to integrate Sonar first, and plans to expand support to tokenised securities and real-world assets through Echo’s infrastructure in the future.

Echo will remain a standalone platform under its current brand for now, Fish said in an X post.

Allocation competition

Coinbase’s acquisition could have some downsides, however.

Interest in popular early stage investments on Echo is already high. Coinbase’s acquisition and the increased exposure it brings could make things even more crowded.

“Competition for allocations will intensify,” Hajian said. “As Echo opens the door to a much larger audience, each fundraising round may attract far more participants, making access to the best deals more limited.”

Hajian said he still sees the acquisition as a net positive for Echo users.

Others, such as Vandeloock, anticipate more early-stage investments on Echo from projects building on Coinbase’s Base blockchain.

“I don’t think much will change for Echo users, however I do hope they will receive a Base airdrop,” he said.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.