Coinbase listing another shot in arm for crypto
Coinbase Global Inc, the biggest US cryptocurrency exchange, was listing on the Nasdaq yesterday, marking a milestone in the journey of virtual currencies from niche technology to mainstream asset.
The listing is by far the biggest yet of a cryptocurrency company, with the San Francisco-based firm saying last month that private market transactions had valued the company at around US$68 billion this year, versus US$5.8 billion in September.
It represents the latest breakthrough for acceptance of cryptocurrencies, an asset class that only a few years ago had been shunned by mainstream finance, according to interviews with investors, analysts and executives.
“The listing is significant in that it marks the growth of the industry and its acceptance into mainstream business,” said William Cong, an associate professor of finance at Cornell University’s SC Johnson College of Business.
Bitcoin, the biggest cryptocurrency, hit a record of over US$63,000 on Tuesday. It has more than doubled this year as large investors, banks from Goldman Sachs to Morgan Stanley and household name companies such as Tesla Inc warm to the emerging asset.
Coinbase’s direct listing — which means it has not sold any shares ahead of its market debut — is likely to accelerate that process, those interviewed said, by boosting awareness of digital assets among investors.
“This is a very positive thing for bitcoin in itself, as it proves the bridge that has been built from an esoteric, left-of-field arena, full of cowboys, to mainstream finance,” said Charles Hayter of data firm CryptoCompare.
Still, some institutional investors voiced caution over long-term prospects for Coinbase and the crypto sector.
Swiss asset manager Unigestion said it was wary of the hype around cryptocurrencies, and as a result would not be buying Coinbase stock.
“We think there is a lot of frenzy and exuberance in everything that looks like crypto,” said Olivier Marciot, a portfolio manager at Unigestion, which oversees assets worth US$22.6 billion.
“Hedge funds and retail will probably be the early birds in these new stocks — probably buying into them pretty heavily — which shouldn’t be a clear indication of how they will be in the longer term.”
Others experts said risks included Coinbase’s exposure to a highly volatile asset that is still subject to patchy regulation.
Founded in 2012, Coinbase boasts 56 million users globally and an estimated US$223 billion assets on its platform, accounting for 11.3 percent of crypto asset market share, according to regulatory filings.
The company’s most recent financial results underscore how revenues have surged in lock-step with the rally in bitcoin trading volumes and price.
In the first quarter this year, as bitcoin more than doubled in price, Coinbase estimated revenue of over US$1.8 billion and net income between US$730 million to US$800 million, versus revenue of US$1.3 billion for the entire 2020.
“The correlation to bitcoin will be very high after the stock stabilizes after listing,” said Larry Cermak, director of research at crypto website The Block.