Coinbase began in 2012 when former Airbnb engineer, Brian Armstrong, and Goldman Sachs trader, Fred Ehrsam joined forces to establish an exchange that would make investing and trading in cryptocurrencies more straightforward and fair. A month ago, Coinbase publicly filed the paperwork to list its stock on the NASDAQ exchange. Now, Coinbase has postponed its anticipated Initial Public Offering from March to April 2021. Some claim that Coinbase IPO delay may be a result of its recent allegations of illegal wash trading practices. Coinbase paid $6.5 million to settle trading investigation with CFTC, for reckless false, misleading, or inaccurate reporting as well as wash trading. Early this month, Jared Dillion wrote on Bloomberg that the digital asset exchange is an “odd business with many unusual risks.”
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Coinbase is about to have a huge public listing. Its $100B+ direct listing will be tech’s biggest public debut since Facebook. The Coinbase IPO will bring in more investments to the market and impact both the size and value.
Coinbase provides a secure and easy way to buy Bitcoin, Ethereum, and other cryptocurrencies and makes its money from transaction fees. Every time a user buys or sells crypto, Coinbase charges a fee for the trade.
According to the company’s website, the company has more than 43 million users in 100 countries and 2.8 million users make monthly transactions. They collectively account $90 billion in assets.
In 2020, the company had net revenue of $1.2 billion, with 96% of the revenue coming from transaction fees. Bitcoin and Ethereum accounted for 56% of trading volume. Coinbase made around 0.57% on each transaction.
As crypto has been growing rapidly, Coinbase has also seen its revenue skyrocket, growing 139% year over year. But the company doesn’t only make money from transaction fees. It also has subscription and services revenue. Coibase has four main non-investing products: store, stake, distribute, and build. Each of these being a value-add to their base level of service.
The revenue from these non-investing products was $45.0 million in 2020, helping the company diversify its revenue stream.
Coinbase really is looking to disrupt traditional banking. When you look at where their revenue comes from, essentially Coinbase is taking a fee out of transfers and purchases or sales of crypto assets. Currently they trade more than 90 crypto assets.
Coinbase’s move to go public is timed perfectly with bitcoin’s growing acceptance. The overall market cap of cryptocurrencies stands over $1.8 trillion. This is big, but the potential to expand is even bigger. While the top cryptocurrency is volatile, investments by Tesla, MicroStrategy, Mastercard, New York Mellon and Square have added legitimacy to bitcoin.
Coinbase’s IPO is a huge validator for bitcoin and the entire market. This is crypto’s “Netscape moment” and will raise crypto’s visibility, just like the Netscape IPO raised the visibility of the internet. The company’s offering will definitely get a lot of attention, marking an important milestone for bitcoin on the road to a mainstream asset class.
Also, institutional investors that have been hesitant about getting into crypto may see the IPO as a safer way to get exposure to the market, instead of buying bitcoin and other crypto.
While Coinbase has taken center stage, there are some stories floating that eToro is also planning on going public in 2021. According to a report, the company added 5 million new customers this year and could be valued at $5 billion. Kraken is another potential candidate. Kraken launched a crypto bank in Wyoming in 2020 and was last valued at $4 billion.
A successful listing by Coinbase, would represent a landmark victory for cryptocurrency and an endorsement for a sector that has struggled to gain the trust of mainstream investors, regulators and the general public. Practically the company’s initial coin offering would be an IPO for bitcoin. If Coinbase’s stock price performs well after listing, you can expect bitcoin mirror Coinbase’s price action and the bull run to continue.
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