Coinbase is the talk of Wall Street as the largest crypto platform in the US gears up for its public debut on a traditional exchange on Wednesday, via direct listing. There is no doubt that Coinbase’s public offering is a huge problem in the world of cryptocurrencies. The company was created just over a decade ago with the genesis of bitcoin BTCUSD, -0.14% and is now in the midst of a moment that many in the industry have described as a tipping point.
Do you want a crash course on the future of cryptocurrencies? Register for MarketWatch’s Free Live Event: Register Here! There are few ways to obtain direct ownership of cryptocurrencies other than buying them outright, a service that Coinbase provides for a fee, and what investors seem willing to pay. Leeor Shimron, an analyst at FundStrat Global Advisors, described Coinbase’s listing as fundamental. “Coinbase’s direct listing is a watershed moment for the crypto industry.” Wedbush analyst Dan Ives said the list is a reflection of the main evolution of crypto. “Coinbase is a fundamental piece of the crypto ecosystem and is a barometer for the growing widespread adoption of Bitcoin and crypto for the next several years in our opinion,” he wrote in a research note Tuesday. Some caution that the implied valuations for Coinbase as a crypto exchange are too high, compared to traditional stock exchanges such as Nasdaq Inc. NDAQ, + 1.18%, where Coinbase will trade directly, and Intercontinental Exchange ICE, + 0, 86%, the parent company of the New York Stock Exchange. In a direct listing, a company trades its shares on a stock exchange, but without contracting banks to underwrite the transaction, as in an IPO. Here’s what you need to know about the next offer. What is Coinbase? The Silicon Valley crypto exchange was co-founded in 2012 by 38-year-old Brian Armstrong, who runs the platform as CEO. Fred Ehrsam, a director at Coinbase, also helped create the company. According to Forbes, Armstrong’s net worth is currently $ 6.5 billion based on his ownership in the company and his wealth is likely to increase if the direct listing is successful. Coinbase will be listed on April 14. The exact timing of the listing is unclear, but Palantir Technologies Inc.’s PLTR, + 8.91% direct trading in September saw its first trade after 1:30 p.m. ET. Where will it be listed? Coinbase will go public on the Nasdaq under the ticker symbol “COIN” as a direct listing, meaning it is not raising new money, as a company with a traditional initial public offering would. Coinbase is Nasdaq’s first major direct listing, with Spotify SPOT, + 5.85%, Slack Technologies WORK, + 0.86%, and most recently Palantir Technologies PLTR, + 8.91%, all opting to list directly at the NYSE. Ratings? Coinbase valuations range from $ 50 billion to $ 150 billion based on some decentralized crypto platforms trying to replicate how the company’s stock might trade. At the higher end of the spectrum, Coinbase would be larger than a number of US exchanges, including ICE, Nasdaq, CME Group CME, + 0.57%, and Cboe Global Markets CBOE, -0.42%. David Trainer, CEO of New Constructs, an investment research firm, said that the value of the crypto platform is ridiculously high. “Despite Coinbase’s revenue increasing in the last 12 months, the company has little to no chance of meeting future earnings expectations that are built into its ridiculously high expected valuation of $ 100 billion,” he said. Coinbase’s expected valuation of $ 100 billion implies that its revenue will be 1.5 times the combined 2020 revenue of two of the most established exchanges in the market, Nasdaq Inc. (NDAQ) and Intercontinental Exchange (ICE), the parent company. New York Stock Exchange, ”he said. Trainer said that based on his calculation, Coinbase’s valuation should be closer to $ 18.9 billion, a decrease of 81% from the expected valuation of $ 100 billion. ‘Not for the faint of heart,’ MoffettNathanson analyst Lisa Ellis explained to MarketWatch why the offer is, as she describes it, “not for the faint of heart,” but rather why she initiated coverage of the exchange on a purchase with a $ 600 target price even before you see your first trade on the Nasdaq. “I’m super super bullish on Coinbase … because you get the feeling that they are a market leader in the space and crypto agnostic,” he said. That said, it acknowledges that currently 90% of Coinbase’s revenue is derived directly from retail, the majority in the US, and trading is primarily focused on the two largest cryptocurrencies: bitcoin and Ether ETHUSD, -0, 71% on the ethereum blockchain. “So the implications are that Coinbase’s revenue is correlated with the level of activity in crypto currency and especially bitcoin and ether.” Ellis says investors should have at least a one-year long-term investment strategy in bitcoin, which could still go to zero on some bearish accounts, but a three-year outlook is even better, because the crypto complex has tended. to operate in three-year boom-and-bust cycles. Validation for crypto or a top? Some bulls see Coinbase as validation for the nascent crypto industry. Alex Mashinsky, director of cryptocurrency trading and lending platform Celsius Network, put it this way: “We view Coinbase’s listing as an additional validation of the space and an important PR opportunity for the entire industry to shine like the future. of finances. ”He told MarketWatch by email. “Coinbase has more users and more revenue than many of the biggest players on Wall Street and is more profitable than any major exchange, and this validation places most skeptics at a crossroads in having to reassess their denial and frustration with the disruption coming from all sides. “Others suggest that it may prove a new top for the market and put crypto prices under pressure after a precipitous rally in recent days and a new record for bitcoin. Yves Lamoureux, President of Montreal-based macroeconomic research firm Lamoureux & Co. told MarketWatch that he fears there is too much euphoria around bitcoin and crypto and sees that it needs to be reduced as a result. “Can you find someone with a bearish viewpoint? “he asked.” A resounding no, “said Lamoureux. Is Coinbase the largest cryptocurrency exchange? Coinbase is the second largest crypto platform, but the largest in the US, by volume. The highest title goes to Binance, which sees $ 47 billion in crypto trading volume in a 24-hour period, according to CoinMarketCap.com. Who else owns Coinbase? The venture capital firm Andreessen Horowitz, is the largest owner of Coinbase, with about 25% of the shares of Class A and 14% of Class B. And Marc Andreessen, director of the venture capital group, is part from the Coinbase directory. In order to dig even deeper into Coinbase, check out 5 Things MarketWatch Should Know About The Company.