Coinbase Direct Listing- Will Other Exchanges Follow Suit?

Coinbase is now one of the biggest and most renowned cryptocurrency exchanges  in the world. Founded in June 2012, the company was able to establish a very strong name in the crypto space, and is regarded as the top crypto exchange in the United States. The average daily volume of Coinbase Pro is more than 3 billion dollars, with weekly customers visits of around 5 million. Couple of weeks ago, the exchange gained more attention after listing its shares on Nasdaq. Many regarded this  as one of the most important milestones made in the history of crypto evolution. Due to the importance of this event, we decided to sum up the most important information and events that happened before and after the direct listing (Top Cryptocurrency Spot Exchanges, n.d.).

History of Coinbase

Rumours connected to Coinbase IPO started to appear during June of 2020, but the official news from the exchange was announced at the second half of December 2020. On 18th of December, Coinbase released an official statement of planning to go public with their shares. The official statement at that time talked about an official listing around the March period via IPO.

However, due to problems with CFTC (Commodity Futures Trading Commission) which was investigating Coinbase for wash trading, the company decided to postpone the initial date of the trading on the Nasdaq to April. The investigation ended up with Coinbase paying 6,5 million dollars.

Coinbase’s Valuation

Nevertheless, Coinbase went public with a reputation as one of the best crypto exchanges. In fact, the change from IPO to direct listing did not make any difference to the valuation. The interval of valuation was, however, huge since some companies expected Coinbase to be valued at around 19 billion dollars, with the biggest possible valuation to be  more than 180 billion dollars (Trading, 2021).

Having a wide range of possible valuations before the listing meant that no one actually knew what the final valuation could possibly look like. Even after the direct listing on 14th of April,  companies still weren’t too sure of the best valuations. For instance, Techcrunch informed that Coinbase started trading its shares at a price of 250 dollars, valuing the crypto exchange at 68 billion dollars. But the very same day, the company shares that are traded under the ticker “COIN,” closed at the price of 328 dollars, valuing the company at around 86 billion dollars after the first trading day (Wilhelm, 2021).

Institutional trading volume of Coinbase, Source: Coinbase S-1 filling

The Impact of Coinbase’s Listing in the Crypto Space

At the peak, which occurred the same day, the COIN shares traded at around 430 dollars per share, which is the ATH of COIN.  Coinbase´s direct listing was  successful, and brought an interesting view to the cryptocurrency situation.

Listing Coinbase in the traditional market is definitely a big win for institutional investors, who are looking for an easy involvement in cryptot. Investing into cryptocurrency is still very difficult for institutional investors, due to many reasons (complexity of the investments or storing crypto safely just to name a few). Buying COIN stock is as easy as buying any other stock, therefore all types of investors can easily get some exposure to the crypto through Coinbase’s shares.

This move also shows that the investors are really intrigued by the cryptocurrency. Further to that, Coinbase made between 700 to 800 million dollars of net income (out of 1.8 billion dollars in revenue) in Q1 of 2021. This is more than  a 60% increase from 2020, hence this explains why investors are keen on this kind of investment (Tepper, 2021).

Estimated revenue of Coinbase, Source: CNBC

What this demonstrates is that crypto companies such as exchanges can raise more money through listing on traditional markets. So it is likely that more of them  may follow this trend later this year. Right now the crypto market is in its bullrun, making  investment in such enterprises even more appealing.

Reference

Top Cryptocurrency Spot Exchanges. (n.d.). Retrieved from Coin Market Cap: https://coinmarketcap.com/rankings/exchanges/

Trading, A. (2021, 4 14). Coinbase Direct Listing Explained (Bitcoin Hits All-Time-High). Retrieved from Youtube: https://www.youtube.com/watch?v=zrl4d8dPSCM&t=3s

Wilhelm, A. (2021, 4 14). Coinbase sets direct listing reference price at $250/share, valuing the company at as much as $65B. Retrieved from Tech Cruch: https://techcrunch.com/2021/04/13/coinbase-sets-direct-listing-reference-price-at-250-share-valuing-the-company-at-as-much-as-65b/#:~:text=Coinbase%2C%20the%20American%20cryptocurrency%20trading,a%20valuation%20of%20%2465.3%20billion.

Tepper, T. (2021, 4 14). Coinbase IPO: Here’s What You Need To Know. Retrieved from Frobes: https://www.forbes.com/advisor/investing/coinbase-ipo-direct-listing/