Coinbase’s listing marks a milestone between traditional finance and its new blockchain-based rival: is it the best of both worlds or an unholy union? asks ALEX SEBASTIAN
Coinbase is the first point of contact for many people with the world of cryptocurrency, especially in the UK and America.
The exchange celebrates its eagerly awaited debut on the Nasdaq today and is expected to see strong demand for the time being. The deal comes at a particularly opportune time as Bitcoin broke the resistance at $ 60,000 yesterday to hit a new all-time high of over $ 63,000.
In particular, it will be a direct listing, meaning that current owners of privately held shares in the company will sell them directly to buyers in the public market. The usual order book building and the underwriting of the business by investment banks for IPOs was dispensed with.
Coinbase will be listed on the Nasdaq this week after it announced it had generated $ 1.8 billion in revenue in just three months
The float is a tempting opportunity for investors who do not want to hold Bitcoin and other crypto assets themselves or who cannot hold them for regulatory reasons, but who want to invest in the burgeoning sector.
The numbers look good at first glance. Coinbase expects first quarter revenue of $ 1.8 billion with net income of $ 730 million to $ 800 million generated by a whopping 56 million verified users.
The advent of Bitcoin as “digital gold” has gained wide acceptance. The asset is on the balance sheet of the world’s largest auto company by market cap, Tesla, while the city and Wall Street are increasingly leveraging crypto assets.
While volatility and sharp price corrections along the way are nearly guaranteed, Bitcoin and crypto in general are here as a financial asset forever. There will be no going back in the bottle.
The remaining die-hard critics, who consider it worthless and destined to zero, likely fail to understand the economic, technological, and social consensus effect that underpins it now.
There is also exciting potential for other crypto assets and blockchain technology, with the emerging DeFi (decentralized finance) industry being of particular importance in the Ethereum network.
For many, the Coinbase listing is the classic game of “selling shovels in gold rush”. That said, providing the tools to acquire a sought-after asset is more lucrative than buying the asset itself.
There is certainly logic in that. Coinbase makes money whether the price of Bitcoin goes up or down. All it takes is people buying and selling as its revenue comes from a small percentage of each trade as well as various other fees from each user.
It’s clear that the rising crypto market is better for exchanges like Coinbase as it attracts more new customers, but the company also spits in a lot of money during a downturn.
The argument against investing in Coinbase stocks appears to be based on three key factors. First, there’s the perennial float worry: Has the company made the decision to enter this time around because it believes things are at a peak for their wealth and are unlikely to get any better in the short term?
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With Bitcoin at a new all-time high this week of over $ 63,000, you could certainly argue that Coinbase’s current private shareholders will cash out at a good time.
Another major criticism that could be made of the deal is that it is neither one nor the other.
It is not a standard stock investment as the company’s assets are so closely intertwined with the emerging cryptocurrency markets and typical comparisons for important things like earnings and stock price multipliers are not available.
It will be very interesting to see how closely Coinbase stocks correlate with Bitcoin price in the years to come.
Neither is it just playing with Bitcoin and other crypto assets like buying coins. For a large part of Bitcoin and blockchain proponents, the main reason they value and believe in it is that it forges a new separate avenue for funding away from traditional markets and the established monetary system.
Buying publicly traded securities from a cryptocurrency company seems to be a contradiction in terms to some, or even hypocrisy.
The third problem is regulation. Coinbase already had a contact with the SEC that delayed the listing and sparked a $ 6.5 million settlement on claims that misreported transactions.
You can be sure that the financial watchdogs will continue to watch Coinbase very closely for the first few years of their life as a publicly traded company. Violations are likely to be costly financially.
However, if you’re a company with close to $ 2 billion in quarterly revenue, you can afford to pay some hefty fines.