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 1.39% Ethereum / USD ETHUSD $ 2,342.82
$32.571.39% Volume 18.65 b Change $32.57 Open $2,342.82 Circulating 116.9 m Market Cap 273.88 b 8 min Avalanche Launches New Cross-Chain Bridge To Connect Users With Ethereum 1 h This Mutual Fund Doubles Down on Bitcoin After Being Downgraded for Too Much Crypto Risk 22 h Altcoins, Not Bitcoin, Drives the Latest 'Massive' Surge in Crypto Adoption: Report , $49 million (20%) in USDC stablecoin USDC -0.04% USD Coin / USD USDCUSD $ 1.00
$0.00-0.04% Volume 2.48 b Change $0.00 Open $1.00 Circulating 27.26 b Market Cap 27.26 b 55 min Rep. Tedd Budd: Some Lawmakers Worry Crypto Could Cause ‘Financial 9/11’ 1 d Only 2.5% Supply Auctioned, Big Chunk Reserved to Reward Users, Explains YGG on its MISO Sale 3 d Tether in 'Open Dialogue' with DOJ, says Company on Report of its Executives Being Under Probe for Bank Fraud , 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 -1.88% Bitcoin / USD BTCUSD $ 38,986.20
-$732.94-1.88% Volume 26.44 b Change -$732.94 Open $38,986.20 Circulating 18.77 m Market Cap 731.82 b 1 h MicroStrategy Will Continue to 'Deploy Additional Capital' in its Digital Asset Strategy: CEO Michael Saylor 1 h This Mutual Fund Doubles Down on Bitcoin After Being Downgraded for Too Much Crypto Risk 19 h “Innovative New Products” like Bitcoin Mini-Futures Leads to an Increase in CME Profits 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.