What Does Coinbase’s Listing Mean For The Future Of The Crypto Industry?
The market has witnessed many fundraising events, such as ICOs and IEOs, but the arrival of IPOs onto the crypto market is a significant development being led by Coinbase, with the cryptocurrency giant conducting its own Initial Public Offering (IPO) on Wednesday, April 14th. This is a significant announcement and follows Coinbase reporting $1.8 billion in revenue in the first quarter of the year last week, compared to $1.3 billion for all of 2020. Taking an alternative approach to the traditional IPO process, Coinbase plans to post its shares straight on the Nasdaq stock exchange via a direct listing.
Amber Ghaddar, Co-founder of AllianceBlock, the first globally compliant decentralized capital market said: “The current frenzy around the Coinbase listing is reminiscent of two historical events: Firstly, the gold miners trade as a proxy investment to gold. A few decades back, certain equity investors couldn’t access gold as they didn’t have a commodity and/or derivative mandate and were instead investing in gold miners. Many retail and institutional investors eying the Coinbase listing are doing the same: they have neither the knowledge nor the infrastructure to invest in Bitcoin and crypto and are using Coinbase as a proxy investment in the sector.
Secondly, in terms of euphoric valuations, Coinbase is right up there with Tesla whose market cap is larger than the top 9 auto manufacturers combined and trading at an overinflated PE of 1000. Based on valuations in European private markets, Coinbase was trading at a $150bn valuation this morning (higher than the LSEG, ICE and CME market cap combined), and at close to 60 price to sales ratio, while other exchanges trade between 3 (Nasdaq) to 15 (CME). This is further proof that the framework of traditional valuations is broken and the current euphoria, driven in part by helicopter money, is nothing but unsustainable.”
Jun Li, founder of Ontology, the high performance, public blockchain specializing in decentralized identity and data said:
“The Coinbase IPO will reset the entire blockchain market, even though within the space there are other giant players as well — ranging from centralized to decentralized exchanges. We will see welcomed increased pressure on states to bring in policy and regulation to the blockchain and cryptocurrency industries. We welcome these regulations because we understand that without regulation, the industry will not be officially recognized. This signifies the acceptance of cryptocurrency business in traditional finance and will bring in even more funding and investment from a range of different institutional investors, but it will also attract new talent to the industry with broader skill sets. I expect that this will be warmly welcomed by Wall Street as many of the institutions there already recognize the potential that blockchain has. Investors can now point to Coinbase as a properly vetted, and publicly traded company as a starting point when reaching out to new market entrants whether those are limited partners, new investors, or other firms. This is a very exciting time.”
Jason Blick, CEO of EQIBank, the global, digital bank and financial services organisation for corporations and High-Net-Worth Individuals, said:
“Brand recognition in the cryptocurrency space has long been the pursuit of all key Exchanges. Coinbase, boasting more than 43 million users, has benefited from Regulatory arbitrage and an accessible product set, which in combination has driven market share. While Coinbase’s forthcoming IPO will give long needed transparency to the financial affairs of a leading exchange, its underlying business model is subject to extraordinary pressure. In the “race to the bottom” pricing models of all leading Exchanges, investor expectations of dramatic long-term returns may be quickly vanquished as lower prices result in profit margins being permanently squeezed. Whether this can be offset by access to the public markets has yet to be seen, but unless Coinbase rapidly expands its product sets to embrace higher-margin financial services, Caveat emptor has never been more appropriate.”
Manuel Rensink, Strategy Director at Securrency, said,
“The $COIN listing will be a huge shot in the arm for the credibility of digital assets, particularly for those listed on Coinbase, which include a range of stablecoins, DeFi coins, utility coins, but not yet digital securities. No doubt a next step will be for $COIN to list on Coinbase and not just Nasdaq. Ironically, this might happen on one of its biggest competitors – Binance, new purveyors of $TSLA stock tokens – before it happens on Coinbase itself. Of course, non-US investors can already get exposure to $COIN on another huge exchange, FTX, valuing $COIN at almost $150bn. FTX’s token, $FTT, stands to benefit from a successful Coinbase listing, as will many other CEX’s and DEX’s. More importantly, as more blockchain companies will join $COIN on Nasdaq, alongside a string of Bitcoin ETFs, we will see that the digital markets will start driving the traditional equity markets, triggering trillions in capital flows.”
“The Coinbase IPO has been highly anticipated in the crypto community, and will be viewed as yet another element that lends credibility to the space. Many crypto supporters and investors are invested in the success of this IPO, and its effects will be felt across the sector. Will it be a success? In a sense, merely getting to this stage – a public listing stock – is an incredible achievement in itself.
The Coinbase NASDAQ listing is essentially the first legitimate bridge between the traditional capital markets and the crypto markets. My estimate is that, once established, we will surely begin to see more flow of capital into crypto-focused companies and cryptocurrencies themselves. This could be viewed as the end of the beginning, or introductory phase of the evolution of the industry. Que mass adoption!
After years of crypto picking away at the edges of the financial markets landscape, the Coinbase listing should serve as the example that there are legitimate and mainstream-ready crypto businesses ready to integrate into the broader capital markets. It certainly does signify the acceptance of cryptocurrency business in traditional finance, and increased access to these markets should spur a growth phase in the industry as a whole. You can expect maturation in the space, both in terms of investment flows, as well as the expansion and development of new services with the accompanying infrastructure.”
“The Coinbase IPO is happening in the middle of a Bitcoin bull run. All eyes are on this event. Success for IPOs’ is gauged in a number of ways, including the ability to raise the amount needed and the post raise price action. Nobody can predict whether a stock is priced well in the market or how the stock will do. But if one were putting odds on it, the positive factors seem to outweigh the factors that may pull it down. You have nearly all of the crypto industry looking at this IPO, nearly all the financial community, as well as a decent amount of retail attention.
If coinbase does well, clearly it’s a bullish indicator. Beyond that, even the listing itself will draw a lot of attention to the opportunities that bitcoin and crypto are bringing to the world. Mainly, having more public companies that are working with crypto and digital assets means more global acceptance of the concepts and innovations that have been introduced.
Going public is a great validator for any emerging industry. The trend has been clear throughout the history of emerging technology — computers (Apple), mobile phone companies (Sprint), software companies (Microsoft), and internet companies (Amazon, Google) all had periods where the financial community and public were sceptical. Going public in the face of this scepticism is a bellwether event, leading to acceptance from traditional spaces and transformation of their industries over time. In the case of Coinbase’s IPO, there is promise for reshaping of both the technology and financial spaces — meaning we may see twice the validation.”
“Coinbase’s listing is a definite statement of the coming of age of a pure play crypto business available for mainstream investment. Recently publicized client acquisition and growth metrics, as well as a listed market cap expected to range between $100-150 billion, will place it in the top tier of all global financial institutions.
To date, much of the growth of the crypto industry has been in private markets with limited visibility to mainstream observers. Coinbase will put paid to the notion that there is no sustainable business model in crypto, and more importantly, will put fear into incumbents that crypto will indeed “eat the banks and financial firms” if they don’t get involved. There is already a flood of investment focused on early stage crypto initiatives and a successful listing this week will only see more capital further drive the sector’s exponential growth.
Legacy financial firms are already seeing their most profitable services being disrupted by fintech, with fintech firms forcing banks to compete with a new business model. However, the rapid growth and success of Coinbase building a crypto bank provides a far more existential risk to legacy institutions. The full range of services provided by Coinbase potentially provides a permanent exit out of the legacy banking system to a completely new global digital-crypto banking model.
A listed equity will be a new currency for Coinbase to leverage for inorganic growth through acquisition. No doubt the pace of growth will force legacy institutions to acquire instead of risking the long time to market required to build their own solution. Banks will increasingly be competing against better funded, more agile and faster growing firms such as Coinbase to acquire the right talent and the next business model. It will be a tough race for incumbents and they have no time to lose.”