This article was initially published on April 14, 2021. Not financial advice.
Coinbase stock has finally gone public. Its IPO (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 the stock market. 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.
Trading did not begin until 1:25 PM EDT. Most likely, that is not because trading was enabled at that exact time. The Nasdaq probably started to allow trading at market open. The unconventional start time was more likely because a random investor decided to sell stock that they already owned at 1:25, which jump-started trading.
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 by Coinbase makes sense, as Nasdaq tends to deal with tech companies like Apple and Tesla. On April first, Nasdaq announced the day that Coinbase was going to go public: 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 100 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 since The Guardian says that the upper bound of analyst valuations is around 100 billion dollars.
Coinbase users have trusted the company with the equivalent of 223 billion dollars in assets! That is the value of all user holdings on the platform. Coinbase has 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 USD. By 2020, this figure was 1.1 billion dollars with 320 million in profit! Then, 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 by Coinbase with the SEC (US Securities and Exchange Commission), 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 into 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 Media 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 percentage points, 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 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. In addition, Crypto could revolutionize the global economy in the future. Some investors have predicted that 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 possibility for large profit if crypto goes even more mainstream, albeit less than buying bitcoin or ether directly. 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.
All in all, this is an exciting development and is hopefully a marker of things to come. Now, all we need is fair regulation and a bitcoin Exchange Traded Fund.