Last week was really historical, wasn’t it? Milestone for cryptocurrencies – traditional financial instruments, stock shares, mixed with a new area – crypto.
Coinbase, the big U.S. cryptocurrency exchange, started trading shares on Nasdaq last Wednesday. The valuation of Coinbase is between $50 billion and $100 billion – larger than major stock exchanges such as Nasdaq and Intercontinental Exchange, the parent company of the New York Stock Exchange.
Coinbase shares are currently priced at $330,12 (-42% lower than open price), but the prospects are huge. As are the prospects for all crypto market assets through the increasing adoption by investors and big money from traditional financial instruments.
Coinbase / USD Chart
Source: Tradingview
Coinbase came to the Nasdaq stock exchange not through a traditional initial public offering (IPO), but a direct listing. It means everyone, from the little guy to big, institutional investors, had a crack at the stock at the same time.
Direct listing, without relying on Wall Street investment banks as underwriters to set the pricing, serves as a cancellation of the traditional approach. But for the crypto-players, deviating from the norm is par for the course.
Why is the Coinbase listing so important? Here are the main reasons:
- Coinbase’s debut was hailed as a “watershed” moment for crypto, after years of skepticism from Wall Street giants and global regulators.
- The Coinbase listing signifies a larger moment of credibility for the cryptocurrency market. The move could force investors and institutions alike to take a closer look at the entire digital asset space.
- COIN listing is the validation that crypto is not a niche market anymore.
And of course, Coinbase is not an ordinary market player. It is a dominant U.S. digital asset exchange and plays a big role in what cryptocurrencies gain acceptance and which ones may be left behind.
Coinbase revenue
Sources: Coinbase, Reuters
Note: 50 percent of Coinbase revenue in 2017 came during December, when the price of Bitcoin rose from $6,540 to $14,782.
Coinbase’s estimated revenue is $1.8 billion for the first quarter of 2021. It’s a ninefold increase from the same period a year earlier, while profits surged from $32 million to between $730 million and $800 million. The number of Coinbase’s monthly transacting users rose to 6.1 million from 2.8 million three months earlier. And will obviously continue to grow after the historical listing.
Coinbase Consolidation Statement of Operations Data
Source: Securities and Exchange Commission
CoinListing had an impact on the price of Bitcoin.
BTC/USD broke resistance at $61500 and reached the new all-time high at almost $65000 per 1 BTC! The current price is near the support level at $61500, and if buyers are strong enough to protect this level, we have an opportunity to see a new move to $65000 as a first target.
BTC/USD Chart
Source: TradingView
What is the reason for the latest drop in BTC?
In my opinion, it’s more technical than fundamental. «Buy the rumor, sell the news» is a well-known phenomenon that happens in most markets, particularly financial markets. Some big players may close their buy positions, and want to add new ones at lower prices. However, there was also speculation that the plunge was related to concerns that the U.S. Treasury may crack down on money laundering that’s carried out through digital assets.
Anyway, the Coinbase listing is the first direct connection between the capital and Bitcoin markets. While some smaller crypto-based companies trade publicly in the US and overseas, no one handles as much crypto as Coinbase, which has some US$223 billion in assets on its platform. That’s why COIN prices are expected to follow the main cryptocurrencies’ prices. And it could provide a unique opportunity for traditional investors!
Traditional “old-school” stock investors and funds may be still skeptical about BTC. But, after the Coinbase listing, they have something like an index for cryptocurrencies. Even if they don’t care about Bitcoin itself, they could buy Coinbase stock.
Although crypto price volatility can be enticing to investors, this straight correlation between crypto prices and revenue is a weakness for Coinbase. In 2019, when the price of BTC fell, Coinbase lost US$30 million. And it’s not just volatility that makes Bitcoin risky – it’s also hacking, cybercrime and theft (remember the well-known example of the Mt.Gox exchange).
Assets on Coinbase Platform and Crypto Market Capitalization
Source: Securities and Exchange Commission
Coinbase has never been hacked. Should Coinbase ever hacked, if their security were breached, if the clients’ assets were ever outright stolen from the wallets or accounts that people have on Coinbase, it would be a disaster for the entire market.
Trying to distance itself from the risks of Bitcoin, Coinbase started to expand what they offer to their customers: retail app, financial account, exchange, custodian services, institutional business, commerce, merchant payments – it’s all part of Coinbase’s product.
The current market situation seems positive for cryptocurrencies. Massive adoption is working. But be careful – just because Coinbase is now public, just because Bitcoin’s perception has been changed in the market, doesn’t mean that BTC is never going down again.
