Published: April 16th, 2021
It’s official, top-two crypto exchange Coinbase is now a publicly-traded company, listing on the tech-focused Nasdaq stock exchange this past Thursday.
It makes Coinbase the first significant cryptocurrency business to go public, with a forecast valuation of over USD 100 billion.
But what does Coinbase's public listing mean for Bitcoin and crypto traders who rely on the exchange?
The line from Coinbase, and indeed much of the crypto industry, is that the public listing can only mean good things for both. It’s the latest evidence in an extended chain of events, they say, that seems to have finally legitimised cryptocurrency in the eyes of former critics.
Analysts at Los Angeles-based Wedbush Securities told investors that the listing marks ‘a watershed moment for the crypto industry,’ potentially pointing to more mainstream adoption in the coming months. ‘Coinbase is the poster child of the crypto ecosystem’ they said, and Wall Street will be watching the listing closely to see how it performs.
But the firm also sounded a note of caution, saying that given Bitcoin’s volatility and developing history, any move by publicly traded companies to add BTC or another crypto to their balance sheets is likely to be a slow burn. ‘We think take-up by public companies will be no more than five per cent over the next 12 to 18 months. That estimate could go notably higher, however, as regulation and greater acceptance become the norm.
Suppose Coinbase's listing doesn’t deliver the expected valuation or pique the right level of market interest. In that case, other crypto businesses mulling over plans to go public could put them on the backburner. That would include competing crypto exchange Kraken, which press reports suggest is looking at a direct listing of its own next year. Crypto custodial firm Bakkt has also discussed plans to go public, though using a different mechanism.
Looking further out across the crypto ecosystem, Bitcoin mining firm Bitfarms to the press this week that the Coinbase listing will likely be seen as the moment the crypto industry truly gained mainstream acceptance by the traditional investment community.
In a statement, the company said that crypto was still considered an outlier industry when it launched three years ago. Today that’s changed, and ‘crypto isn’t new or novel anymore’. With its direct listing on a major exchange, Coinbase is sign-posting ‘a surge in legitimacy and trust in the crypto industry, both among retail and institutional investors.’
Meanwhile, analysts at Blockchain Research Lab said Coinbase going public might prompt more traditional investors to gain BTC exposure, as owning Coinbase stock lets them sidestep having to navigate often-confusing technical complexities of crypto.
While it’s hard to argue with the notion that one of crypto’s biggest brands going public adds credibility to the crypto industry as a whole, Coinbase announcements haven’t generally led to significant upticks in the price of BTC in the past.
For example, in early April, Coinbase announced record-breaking Q1 profits of around USD 750 million, smashing the company's previous performance for the entirety of 2019. Bitcoin shrugged off the news, and its price barely moved, actually ending the day slightly lower.
In late February, the day Coinbase formally registered its plans for the Nasdaq listing, it revealed year-to-date profits for 2021 of USD 320 million. Again, Bitcoin markets were unfazed. After an initial spike when the Coinbase announcement hit newswires, BTC’s price closed the day lower, dropping from USD 49,839 to USD 46,989.
Still, the signs and portents around this week’s listing are broadly positive. It’s worth noting that Bitcoin reached a new all-time high the day before Coinbase went live on Nasdaq. Analysts and other industry watchers believe the anticipated arrival of a proper crypto company stock may have played a role in pushing BTC upward again into new pricing territory.
Perhaps it’s not unexpected for the crypto faithful to make positive noises whenever mainstream market adoption signals happen. But as ever in crypto, there are dissenting voices. Some are sceptical that Coinbase going public will affect Bitcoin on its own. There is still a massive disconnect between the crypto industry and the mainstream economy. One company issuing stock isn’t a big enough event to bridge the gap on its own.
Some are dismissive. Equities analytics firm New Constructs has issued a report saying that USD 100 billion valuation expected for Coinbase stock is ‘silly.’ The company’s analysts make much of the fact that the crypto market is still in a nascent phase. Once the sector matures and competitors start to chip away at Coinbase’s market share, its position won’t seem so enviable.
Of course, Coinbase maintains a different view. In its regulatory filing to the SEC, the company argued that crypto has the same revolutionary potential ‘to transform and improve the world as the internet.’ New Constructs' analysts, however, responded that crypto adoption still has significant hurdles to jump. Some two-thirds of Americans in a recent poll said they had 'zero interest in crypto, and close to twenty per cent hadn’t even heard of it. Estimates of US adults with cryptocurrency investments are around nine per cent.
Regardless of the surging revenues its seen over the past 12 to 18 months, Coinbase may struggle to meet the heady expectations for future profits that come with its expected USD 100 billion valuation.
But is such a gloomy prognosis supported by the evidence? Even if most Americans remain unaware or sceptical, crypto doesn’t need a majority of consumers to adopt it to declare it a success. Rather than compare cryptocurrencies to traditional assets, perhaps a better example is Tesla. It defied conventional market expectations and proved that even technology at an early development stage could have a massive market impact.
At the time of writing, Coinbase's (COIN) stock price was USD 322.75, giving it a market cap of SUD 84.33 billion.