On April 14 there will be one of the most anticipated IPOs in recent months (and even years), especially for all those interested in technological issues. After a long time of preparations and rumors, Coinbase, the most popular cryptocurrency exchange globally and a symbol of this market, will finally hit the market. And you can see the tension. A news expected by a sector in full growth, but that means much more. The reason? It is not very clear what can happen next, but its future is key.
The news that this path to the Nasdaq was decided came last summer, at which point Reuters reported that the company was preparing its jump, but the rumors go much further. Already in 2017, in the first ‘fever’ for bitcoin, Coinbase, which was not yet a very well-known business, emerged as the first unicorn ‘bitcoiner’, reaching over 1,600 million dollars of valuation and occupying the first position of the most downloaded applications for several weeks. From that moment on, there was already talk of a possible listing of the company, but the reduction in the general interest in crypto assets limited this company as well. Now, 4 years later, and coinciding with the last jump of the ‘bitcoin’, its value is 68,000 million and speaks of that after April 14 that figure will climb to close to 100,000.
The company, founded in 2012 by Brian Armstrong, current CEO, has accompanied the development of cryptocurrencies since its inception, when few even knew what blockchain technology was and it has shared its rises and falls to become a symbol of cryptography. Thus, with this latest wave, it has also lived its own records. At the close of fiscal year 2020, it had 43 million verified users in a hundred countries and managed assets worth 90,000 million dollars, while its annual results showed net gains of more than 322 million (in fiscal year 2019 it registered losses ) with a turnover of 1,300 million.
This start of 2021 has not gone bad at all and their numbers, if they already seemed stratospheric, these are from another galaxy. As published this Tuesday by the company, in this first quarter, its number of users has grown by 117%, the total volume of operations on the platform reached 335,000 million dollars and the cryptocurrency exchange brought them revenues of almost 1.8 billion with final benefits of about 720 million. Are these numbers enough for a good IPO? After so much time in preparation, everything points to yes, but doubts remain in the air, and that is still unexplored terrain for your industry.
The North American company will be the first cryptocurrency exchange to go public, a milestone, such as being the first unicorn in the sector, which demonstrates the importance of this company for the rest of the sector, and that makes it many see with tension what may happen on April 14. A poor arrival to the market can affect a very volatile market, but its scope is unknown. The analyst specializing in crypto assets at the site DecenTrader, FilbFilb, relates the exit to a possible fall in the most important digital currency on the planet, bitcoin, which could go from touching $ 60,000 to falling to $ 20,000. “We may see an increase in volatility around April 14 and we should pay particular attention to the time from here until options expire at the end of the month.”
We’re happy to announce that earlier today, the SEC declared our S-1 registration statement effective and that we expect our direct listing to occur on April 14, 2021, with our Class A common stock trading on the @NASDAQ under the ticker symbol COIN.https://t.co/cwRZWmj9Pv
— Coinbase (@coinbase) April 1, 2021
Other experts like Willy Woo predict the opposite, and assure that there is “much more bull market to come”, but what is clear is that the relationship between ‘tokens’ and Coinbase is so strong that the success of the second may depend on the future of the first, and vice versa. This IPO can be a before and after for the ‘crypto’ industry and the data also supports it. As confirmed by the Coinbase management on Tuesday, the total cryptocurrency assets on its platform reached 223,000 million dollars in these first months of 2021, which is about 11% of the total market capitalization of digital currencies, and the number includes around $ 122 billion in digital assets from institutional clients. In other words, 11% of the entire market passes through this exchange house and more than half of what they move comes from large investors.
Investment ‘app’ or ‘cryptobank’?
This last piece of information is important and is that a great debate that arises around Coinbase is its nature given the evolution it is having. In case you do not know this ‘app’ yet, it is the largest cryptocurrency exchange in the world, rivaling some other such as Binance, of Chinese origin. Its platform, available for both computer and mobile phones almost everywhere in the world, works as a place for the exchange and sale of digital currencies and its business model is based on the commissions it charges per transaction. That is, the closest thing to its work would be a traditional ‘trading’ app. But lately its work, and its strategy, has been much more, establishing itself as a place of custody of these currencies, a kind of crypto bank, which may be the largest in the world.
The investor and crypto expert, involved in various cryptocurrency projects since 2013, Fernando Gutierrez, He is clear, Coinbase was born as an exchange house, but its development goes much further. The institutional investment numbers they handle attest to this. “From the beginning Coinbase was clear that it was not going to be a classic ‘crypto’ exchange, large investors appeared behind the projectIt was very clear to follow the regulations, give a vision of security and trust, and take care of all the details. That also led it to grow less than others that listed more ‘tokens’, which were more aggressive, such as Binance, but in the end it has been seen that their strategy could work and gain many followers, especially among big names, “he explains.
Even when it was a small project, it already fought to try to get all the licenses, in Europe it took a long time to come out, it did a lot of lobbying for regulation, and that, although at first it caused it to go after other names, now it has become a trusted brand. It has even been acquiring different assets, such as Xapo’s custody apparatus (with a bunker under a mountain included), with the idea of growing up on that side of the road. “You just have to see when a ‘token’ comes out. Listing it on Coinbase almost instantly causes a considerable increase in its value, it is like an endorsement of the project. And it gives investors the idea that it is a safe place and confidence to trade cryptocurrencies “.
Coinbase would now be the 17th largest bank in the United States, with $223 billion in assets.
— Documenting Bitcoin 📄 (@DocumentingBTC) April 6, 2021
.@Coinbase confirms run-rate EBITDA of $7.2B with 56M users, more than every banks sans JP Morgan.
— Joe McCann (@joemccann) April 6, 2021
For Gutiérrez, the IPO has two readings. On the one hand, it will be a boost for the blockchain industry, getting many more people to trust this sector and see, through the Coinbase signal, that this is very serious. And on the other hand, it will accelerate the merger with the traditional financial market, which is where the industry is heading. “The 11% who comment on Coinbase is outrageous, and shows the evolution of this industry. Very few people keep their digital assets in private and secret ‘wallets’, most are in sites like this ‘exchange’ to give profitability, trade with them … Come on, as one more financial asset of the system. Another ‘exchange’, Kraken, has even opened its own bank in the United States “.
The step taken by Armstrong’s company is moving in that direction, in that of seeking that the traditional financial world, and the institutional one, really take crypto seriously, and include it in the system. Fundamentally Coinbase thinks of the US, but Europe is also beginning to take a step in that sense. The MiCa directive, which can be approved in 2022, will mean a giant step in this regard to regulate this industry in the European Union, and in Spain, although it is still viewed with considerable suspicion, it must be remembered that, for example, BBVA is an investor in Coinbase. “It is something inevitable, each time the positions are closer and I think that most of the users push in that sense. It is true, and that is the bad side, that the rogue, breaker, and transgressive point of cryptocurrencies is going to go. disappearing. You no longer go against the system, you join it. ”
As for whether the IPO can affect the price of the ‘tokens’ in the short term, the expert believes that there is more connection in the opposite direction. “If Coinbase falls, something that I see difficult, it may affect something, but very little. People who have their money in ‘crypto’ are not going to move it because a stock goes downThey are separate markets in that sense and when you enter cryptocurrencies you know that it is something very volatile and risky, you are not going to be scared by an action. What can happen is that if, for example, the price of ‘bitcoin’ falls, Coinbase will also do it because its fall will mean that it will earn less money “.
Doubts and some scandal
Coinbase has already warned in its pre-IPO presentations that market volatility and changes, specifically, in the price of ‘bitcoin’ are one of the company’s highest risk points, but they are not the only ones. In addition to market volatility and how little regulation there is still around cryptocurrencies right now (The company along with other giants such as Fidelity or Square have just created a new ‘lobby’ to pressure towards regulation in the US), Coinbase will also have to deal with other internal problems in its attempt to conquer Wall Street.
Like so many other technological ones, this company has also gone through various scandals, and some point to a key figure who can play against their success: their CEO and co-founder. He has a large stake in the company (he has about 49 million shares valued, before the IPO, at 14,000 million dollars) and leads the entire strategy, so some media and experts have already pointed out that this may be a weak point, but also has not been spared various controversies. At the end of 2020, 23 former workers of the ‘exchange’ accused their company of racial discrimination and reported it in The New York Times. The article even claimed that three-quarters of Coinbase’s black employees had left the company.
Finally, the most recent problems have had to do with a fine of 6.5 million dollars that the United States Commodity Futures Trading Commission (CFTC) imposed on him in March and that helped to delay the date IPO. The punishment came after the CFTC found that Coinbase acted incorrectly over a three-year period (from 2015 to 2018), even using multiple trading programs that operated in unison. According to the regulator, the company incorrectly gave trading data on bitcoin and an employee self-traded to create the illusion of volume and demand for Litecoin.
Be that as it may, Gutiérrez does not see that these problems could endanger the future of Coinbase, rather he predicts a different future, in which its value on the stock market grows and both traditional companies and even banks realize that this is serious. “It is an important moment for the sector because it will be seen that we are no longer four geeks wanting to have fun and stand up to the system. Moreover, that anti-system side is going to be lost. Everything has its pros and cons. ”