This article was initially published on April 14, 2021. Not financial advice.
Coinbase stock has finally gone public. Its IPO, or Initial Public Offering happened today. This comes after months of talking and preparation for this momentous event. On January 28, 2021, Fortune announced that leading United States cryptocurrency exchange Coinbase wanted to allow the public to buy shares in itself through a ‘direct listing’ on a stock market exchange. A direct listing is when a company does not issue any new shares of stock. They just allow those shares to be traded by anyone. So, for it to work, current investors need to be willing to sell some of their shares and in that way start trading.
That is why trading did not begin until 1:25 PM EDT. It seems like that was not because that is when the Nasdaq allowed trading to start. The Nasdaq probably started to allow trading at market open. The start time was more likely because that is when the first investor decided to sell stock that they already owned and jump start trading.
A chart showing the price of Coinbase stock, ticker COIN:
The listing company that Coinbase went with was the US company Nasdaq. Nasdaq runs a giant stock exchange and lists companies whose combined valuation is over ten trillion dollars. The Nasdaq-100, an index made up of all of the biggest companies listed by Nasdaq is worth 7.5 trillion alone. This choice made by Coinbase makes sense, as the Nasdaq tends to deal with tech and other innovative companies like Apple and Tesla. On April first, Nasdaq announced the day that they were going to go public on Wednesday, April 14. That just happens to be today.
What is Coinbase?
Coinbase is America’s largest cryptocurrency exchange. It is worth a little under a hundred billion dollars now at the current price of 334 dollars per share. This is pretty high, considering that just in March, estimates by Reuters placed the valuation at 68 billion US dollars. But, it makes some sense according to The Guardian who says that the upper bound of analyst valuations is around $100 billion. Coinbase users have trusted the company with the equivalent of 223 billion dollars in assets! That is the worth of all user holdings on the platform. They have 56 million verified users in a hundred countries. Millions of those are in the US.
In 2016, gross revenue (how much the company made not accounting for any sort of expenses) was just sixteen million. In 2020, this figure was 1.1 billion dollars with 320 million in profit. But just in the first quarter of 2021, just three months, Coinbase brought in 1.8 billion of gross revenue and 765 million dollars in profit (Business of Apps). The growth that can be seen in these figures, filed with the SEC ( US Securities and Exchange Commission) by Coinbase, is staggering. The crypto market is booming, and so is Coinbase’s business.
Coinbase tweeted today about its mission and the IPO:
This IPO is significant because Coinbase is the first major cryptocurrency company in the US to allow any investor to own stock in it. It marks bitcoin and crypto’s entrance to the mainstream and legitimate world.
We spoke to stock investor and recent bitcoin buyer William Attenhouse. He decided to buy Coinbase stock today, just twenty minutes after it became available for purchase. He told GoldPundit the following when asked why he bought the stock:
I think it was because it’s clear that crypto will continue to grow in the future. I’m a little bit worried about a federal crackdown on trading and the introduction of new regulations, but I think it’s worth it to get your foot in the door while things are still new. There’s no reward without risk!— Will Attenhouse
Coinbase is a unique investment because it allows normal people to put some money into the growing cryptocurrency space with the ease of buying a stock and without some of the risk of crypto. Currencies like bitcoin are extremely volatile, speculative, and unstable. But companies have physical assets, customers, and the stability that comes with a big blue chip corporation. This makes Coinbase a less risky and more appealing investment for the average person. And the cryptocurrency market is growing fast. Bitcoin has gone up around 900 percent since this time last year. And other cryptocurrencies have gone up thousands of percent, like ether, the native currency of the Ethereum ecosystem. This shows that crypto has lots of room to grow. Bitcoin’s market cap is currently 1.2 trillion dollars, and all of crypto is worth a staggering 2.27 trillion. It seems like it was just last week when bitcoin was worth less than a billion dollars. Times have changed.
There is a incredible growth potential in crypto. Legendary investor Cathie Wood of Ark Invest bought a quarter billion dollars worth of Coinbase stock today, according to CNN. She looks for innovation, so her purchase shows her support for the digital money space. Crypto could revolutionize the global economy in the future, and it could become bigger than gold; so more than a ten trillion dollar market capitalization. That is amazing.
If you are looking to get into the bitcoin and crypto space without the volatility and risk of buying the company straight up, Coinbase might be a good option. Companies are a lot more stable and enduring, and stock market regulations prevent giant swings in price. There is the possibly for large profit if crypto goes even more mainstream, albeit less than buying bitcoin or ether strait up. But if you are more risk averse, or just prefer the easy process of buying shares in the stock market, Coinbase will help you get in on the action.
Remember, this is not financial advice. You should probably consult a professional financial advisor before you take action and buy stock or crypto. And, always do your own research. This is exciting, and is a marker of things to come. Now all we need is fair regulation, and a bitcoin ETF.