Crypto exchange platform Coinbase makes its market debut

• Crypto exchange platform, Coinbase, made its stock market debut on the Nasdaq Index
• How is the cryptocurrency firm, Coinbase different from other cryptocurrency exchange companies
• Coinbase’s US market debut triggers a listing frenzy
• Billionaire investor Mike Novogratz expects Bitcoin to hit USD 100,000 in value by 2021-end

Cryptocurrency exchange platform, Coinbase, made history on Wednesday 15th April by becoming the first crypto exchange platform to be listed as an Initial Public Offering (IPO) in the USA.

Coinbase made its stock market debut on Wall Street’s Nasdaq Composite Index yesterday, with shares for the digital currency exchange platform surging as high as USD 429.54 (GBP 311) within minutes of its opening.

On Wednesday, its closing level gave the platform a total valuation of USD 86BN (GBP 62.3BN), but earlier in the day, the stock’s valuation exceeded USD 100BN (GBP 72.5BN).

The move was touted as a significant milestone for the crypto community, which has seen digital currencies such as Bitcoin, Ethereum and Litecoin flourish in recent years.

Coinbase, which according to MarketWatch, is the largest cryptocurrency platform in the US by size and the second-largest by volume, has over 40 licences to operate in the US and 30 licences in other countries across the world.

The company founded in San Francisco’s Silicon Valley has been a discussion source across the trading community and the US Federal Reserve (Fed), unsurprisingly.

The Fed is already working on a digital dollar to Wall Street’s dismay as this is threatening to shake up the financial landscape.

With financial services companies and major corporations such as Visa and Paypal incorporating digital currencies into business plans, central banks appear keen to introduce online money. The Fed has also revealed that prototypes of its digital dollar could be unveiled as early as July.

Coinbase, which was founded ten years ago, became popular amongst cryptocurrency traders as it provided them with an easier way to exchange digital currency shares.

The San Francisco-based company’s fortunes are also closely tied to Bitcoin – often referred to as the “king” among cryptocurrencies due to its popularity within the industry.

Bitcoin rallied after Coinbase debuted on Nasdaq

Bitcoin’s value has increased by more than 1,000% in the last 12 months, and the digital currency hit an all-time high of USD 64K on Wednesday following Coinbase’s coming-of-age moment.

Since the start of 2021, Bitcoin has almost doubled in value, having started the year at USD 35K (GBP 25K) – an increase of USD 29K (GBP 21K).

Coinbase is intrinsically linked to demand for Bitcoin and other cryptocurrencies such as Ethereum, meaning when share prices for these digital currencies rise or drop, Coinbase is also exposed to the rise and fall.

The crypto exchange platform expects its Q1 revenue to hit approximately GBP 1.8BN in 2021 – exceeding all income accumulated for 2020.

Its market value at USD 85.78BN (GBP 62.2BN) means it is already one of the largest publicly traded US companies, as there are only 93 other firms registered on the S&P 500 with a higher value.

Furthermore, unlike most newly registered firms, Coinbase has shown investors that it is profitable, albeit several industry professionals have warned that it may be too profitable for its own good.

Despite evidence showing that revenues doubled from USD 483M to USD 1.14BN, Fed Chair Jerome Powell insists that cryptocurrencies are “vehicles for speculation.”

Fed Powell also notes that customers cannot use cryptocurrencies for payments like the US dollar (USD) and other traditional currencies.

Coinbase generates profit through its 0.5% transaction fees from trading and services such as analytics.

What is Coinbase, and how does it work?

Coinbase is a cryptocurrency exchange platform founded by American business executive and investor Brian Armstrong and former Goldman Sachs trader Fred Ehrsam.

Instead of going down the traditional route of Initial Public Offering (IPO), Coinbase is a public crypto exchange platform, meaning it posts its shares on the Nasdaq Index via a direct listing.

It offers a service to buy and sell digital currencies such as Bitcoin, Ethereum, Litecoin and more than 50 other cryptocurrencies through bank transfers. It has become a digital stablecoin for traders, who can exchange traditional money for online currency.

Coinbase also offers a Coinbase Card, allowing its customers to use their digital currencies at VISA card locations in the US.

Co-founder of Initialized Capital Managing Partner Garry Tan has described Coinbase as the “cornerstone of connecting the crypto world with the real world.”

However, billionaire investor Mike Novogratz warned that a crypto market “washout” could be on the cards following the listing frenzy that saw Bitcoin and XRP soar in price.

During a virtual event at MarketWatch, Mike Novogratz, who is the founder and chief executive of the diversified financial services and investment management company Galaxy Digital, said: “I’ve seen a lot of weird digital coins have huge retail spikes.

“The frenzy never ends well, so we’ll probably have a washout at one point.”

He added: “There’s likely to be some volatility over the next week as excitement around Coinbase subsides.”

That said, Mr Novogratz is relatively optimistic about Coinbase’s short-term outlook and stated that its IPO is “monumental” for the crypto industry.

He noted that Coinbase’s success would also trigger Bitcoin growth, which he expects will hit USD 100K (GBP 72.5K) by year-end and possibly be worth five times that amount by 2024.

The crypto bull went on to say that “the amount of growth that the digital currency space is set to see is staggering – we’re just getting started.”

However, not all investors are buying into cryptocurrency hype. CEO of investment research firm New Constructs, David Trainer, said Coinbase has “little-to-no-chance of meeting the future profit expectations that are baked into its ridiculously high valuation.”

Mr Trainer also values Coinbase closer to USD 26BN, against reports that the company’s market value is USD 86BN.