Coinbase is the first point of contact for many people with the cryptocurrency world, especially in the UK and America.
The exchange makes its highly anticipated Nasdaq debut tomorrow and is expected to see strong demand initially. The deal comes at a particularly opportune time, with Bitcoin today breaking through resistance at $ 60,000 to a new high of over $ 63,000.
This will include a direct listing, which means that the current owners of private shares in the company will begin selling them directly to buyers on the public market. The usual constitution of the order book and the subscription of the operation by investment banks observed in most IPOs have been abandoned.
Coinbase to float on Nasdaq this week after revealing it booked $ 1.8 billion in revenue in just three months
Float represents a tantalizing opportunity for investors who are unwilling, or for regulatory reasons, unable to own Bitcoin and other crypto assets themselves, but want to invest in the booming industry.
The numbers certainly look good at first glance. Coinbase said it expects first-quarter revenue of $ 1.8 billion with net income of $ 730-800 million, generated by a colossal 56 million verified users.
The emergence of Bitcoin as “digital gold” has become widely accepted. The asset is on the balance sheet of the world’s largest carmaker by market capitalization, Tesla, as the City and Wall Street increasingly embrace crypto assets.
While volatility and sharp price corrections along the way are almost guaranteed, Bitcoin and crypto in general are here for good as a financial asset. It will not be possible to put the genie back in the bottle.
The remaining staunch critics who see it as worthless and destined to “go to zero” probably do not understand the effect of economic, technological and social consensus that now underlies it.
There is exciting potential in other crypto assets and blockchain technology as well, with the booming “DeFi” (decentralized finance) industry on the Ethereum network.
For many, the Coinbase IPO represents the classic game of ‘selling shovels in a gold rush’. That is, providing the tools to acquire an asset in demand is more lucrative than buying the asset itself.
There is certainly a logic to this. Coinbase makes money whether the price of Bitcoin goes up or down. All he needs are people buying and selling, as his income comes from taking a small percentage of each transaction, along with various other fees from each user.
Obviously, the rise in the crypto market is better for exchanges like Coinbase because it attracts more new customers, but the company also accumulates a lot of money when it slows down.
The argument against investing in Coinbase stocks appears to be based on three key factors. First, there’s the lingering concern over the IPO: Did the company choose to go into the market this time around because it thinks things are at a peak in terms of fortune? and that it is unlikely to improve 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 current private Coinbase shareholders will cash in at the right time.
Another key criticism that could be leveled at the deal is that it is neither one thing nor another.
This is not a typical stock investment, as the company’s fortunes are so closely tied to the emerging cryptocurrency markets, and the typical comparisons for key things like earnings over price multiples of the action is not available.
It will be very interesting to see how much Coinbase shares correlate with the price of Bitcoin over the next couple of years.
It is also not a pure game on Bitcoin and other crypto assets. For a large portion of Bitcoin and blockchain proponents, the main reason they appreciate and believe in it is that it creates a new and distinct path for finance away from traditional markets and the established monetary system.
Buying publicly traded securities from a cryptocurrency company seems like a contradiction, if not hypocrisy.
The third problem is regulation. Coinbase previously had contact with the SEC, which delayed the IPO and triggered a $ 6.5 million settlement over allegations it was incorrectly reporting transactions.
You can be sure that financial watchdogs will continue to monitor Coinbase very closely during the first years of its life as a publicly traded company. Any transgression is likely to be costly financially.
But if you’re a business that generates nearly $ 2 billion in revenue per quarter, you can afford to pay a few hefty fines.
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