Coinbase Going Public Is A Watershed Moment for the Cryptocurrency Industry
Coinbase going public will be making some people very rich as institutions start to dominate exchange’s volumes, while CT was disappointed in the money-making crypto company having surprisingly small amounts of digital currencies in their treasury balance sheet.
Coinbase Global Inc. has filed with the US SEC for a direct listing on Nasdaq, and it has the crypto market excited, and the traditional markets are taking notice, as the financial statements of the company revealed that the exchange has been making a lot of money.
Interestingly, a good majority, 85% of the 130 companies that went public in the US last year, was unprofitable. But with Coinbase, the matter is altogether different.
San Francisco-based reported revenue of $1.28 billion in 2020 versus $533.7 million in 2019.
Given the record trading volume, the number of new users, as well as the crypto trading platforms it has been acquiring in just the two months of 2021 amidst the wild bull run, the revenue in the first quarter will be off the charts and is expected to surpass $2 billion, for the exchange.
This puts Coinbase with over a $100 billion valuation, more valuable than CME, ICE which owns the NYSE, CBOE, and Nasdaq.
This will certainly be making Coinbase CEO Brian Armstrong, and its top executives, rich by billions of dollars as a result of this valuation, which would make it one of the biggest companies to go public since the social media giant Facebook.
The CEO owns 21.8% of the company's voting power, followed by a16z's Marc Andreessen at 14.2%, who owns twice as many shares as Armstrong, and co-founder Fred Ehsram 9%. In total, the 11-member board has the majority voting control.
To be listed under the ticker COIN, Goldman Sachs, JPMorgan, and Citigroup are the market makers who are also the advisors on the transaction with another addition Allen & Co.
One of the largest exchanges, Coinbase, reported 43 million verified users, steady growth from 23 million in Q1 of 2018. As for the transacting users, in Q4 of 2020, it was 2.8 million, nearly the same as 1Q18 at 2.7 million.
Unlike the transacting users, in 1Q18, when the market topped, Coinbase recorded $56 billion in trading volume, but during the last quarter, it was $89 billion.
The big difference has been in Coinbase’s volume by customer segment, as back in Q1 of 2018, retail dominated the exchange with more than an 80% share; it has completely changed to institutional accounting for 64% of volume in 4Q20.
Exciting & Embarrassing
Crypto Twitter (CT) has been excited about this development as Matt Huang, Co-founder at Paradigm, previously a partner at Sequoia, congratulated the company, “The Coinbase S-1 is just one step along the way toward building a legendary company… but still, one hell of a milestone.”
“This represents another major milestone in the development of the cryptocurrency industry,” tweeted Jay Hao, CEO of crypto exchange OKEx. “Coinbase's S-1 filing will undoubtedly have a profound impact on the crypto market and usher in a new era of mainstream crypto adoption,” he added.
What really set off the CT was the fact that Coinbase, which started in 2012 when the price of BItcoin was about $5, holds only $130 million worth of BTC.
Besides having 55% of their modest crypto treasury, separate from cash and cash equivalents at $1.1 billion, the company has $24 million (10%) in Ethereum ETH -2.30% Ethereum / USD ETHUSD $ 1,962.59
-$45.14-2.30% Volume 15.84 b Change -$45.14 Open $1,962.59 Circulating 120.86 m Market Cap 237.2 b 4 mon Coinbase Predicts Substantial Growth of Newer L1 Chains & Institutionalization of Regulated DeFi 4 mon A Possible Crypto Recovery Moving Into New Year, Risk-on Sentiments Send The Stock Market to Another Record High 4 mon The Sandbox Game Is Migrating to Ethereum Sidechain Polygon and Launching A DAO in 2022 , $49 million (20%) in USDC stablecoin USDC -0.02% USD Coin / USD USDCUSD $ 1.00
$0.00-0.02% Volume 5.42 b Change $0.00 Open $1.00 Circulating 52.94 b Market Cap 52.94 b 4 mon UST Grows 55x to Become the 4th Largest Stablecoin, Terra DeFi Ecosystem Amasses $18B in Assets 4 mon Over 77% of the SOS Airdrop Was Claimed by OpenSea Users 4 mon Bitcoiner Senator, Cynthia Lummis, Is Planning to Bring In A New Crypto Bill Next Year , and $34 million (15%) in other altcoins.
Given that Coinbase is a cryptocurrency-centered company, some even called this crypto stash “embarrassing.”
But many expect Amrstong, Ehsram, and other early backers to own heavy Bitcoin BTC -3.10% Bitcoin / USD BTCUSD $ 29,253.01
-$906.84-3.10% Volume 30.52 b Change -$906.84 Open $29,253.01 Circulating 19.05 m Market Cap 557.13 b 4 mon SEC Commissioner says NFTs Might Fall Within Their Jurisdiction, Gensler Hires Senate Aid for Crypto Policy 4 mon A Possible Crypto Recovery Moving Into New Year, Risk-on Sentiments Send The Stock Market to Another Record High 4 mon Bitcoin and Ether Dump More Going Into Year-End, ETH Killers Showing Great Momentum and crypto bags personally.
Coinbase going public, meanwhile, is also expected to be bullish for other exchanges and their tokens. “I think the bigger the Coinbase IPO gets, the better for exchange tokens. Doesn't matter that owning an exchange token ≠ actually owning stock. Just matters that a lot of people will feel priced out of coinbase” noted trader DonAlt.
As we reported, US-based Kraken is also planning to raise funds that could more than double its valuation and surpass $20 billion.
Interestingly, in its filing with the SEC, Coinbase also mentions that they do not maintain a headquarter as of May 2020 and that they have become a remote-first company.