It’s only Wednesday and this week has been an exciting one for cryptocurrency. Yesterday Bitcoin hit another all time high of $65,000 and today the excitement builds with Coinbase’s listing on NASDAQ.
Coinbase is one of the leading cryptocurrency exchange platforms and the first to make a public offering. By the time this article goes live, their direct listing will be available on NASDAQ under $COIN. The company has a mammoth valuation of $100 billion and a reference price of $250 so it will be interesting to see where this goes.
What’s the opportunity?
Potentially huge. The cryptocurrency market cap is currently $2 trillion and growing. Anyone with a mobile device can download the coinbase app and buy cryptocurrency making cryptocurrency more accessible than ever before.
Around 90% of Coinbase’s revenue is generated by retail investor transaction fees with the remaining 10% from products and services supplied to institutions, corporates and ecosystem partners.
In 2020, Coinbase’s user base grew from 32 million to 43 million and this year they have continued this growth, now boasting around 56 million users on the app.
While the retail part of its business is heavily dependant on the crypto market and subject to its volatility, there are also opportunities for expansion into less volatile revenue streams – for example, partnering with new corporate clients (they already work with Tesla and many hedge funds, adding new products and services and expanding into new geographies).
Potential threats
The valuation and the excitement around this listing is no doubt going to have an impact on price but it’s difficult at this stage to say whether it’s justified.
Another risk around the valuation is that it depends to some extent on the performance of the crypto market, which is very much outside of Coinbase’s control. A crypto bear market could pose a significant threat.
The competition faced by Coinbase is high and not just from other exchanges like Kraken and Binance. It seems everyone wants a piece of the action and Coinbase could face competition from fintech companies, neobanks and payment apps like PayPal and Square.
Cryptocurrency is also very much in its infancy and there are potential risks from both a regulatory angle and also security threats from cyber attacks.
Will I be buying?
Not yet, but as a believer in the potential of blockchain, I will be adding it to my watch list and looking for an opportune moment to buy in. This is a key milestone in cryptocurrency market history and a significant step in democratising cryptocurrencies. If anything, I look forward to seeing the benefit of this listing reflected in my crypto wallet.