The New York Times referred to the launch of Coinbase’s public launch as a “cryptocurrency coming-out party”: a moment–or possibly the moment– when cryptocurrency is truly hitting the ‘mainstream’.
When the listing went live on Wednesday, each share of COIN was trading at $381, which is 52 percent higher than the estimated reference price of $250. Eventually, the price closed at $328.28, giving the company a valuation of $85.7 billion based on all its outstanding shares. The sum was over 10 times higher than the company’s last valuation as a private firm, and reportedly rivalled AirBNB and Facebook’s initial valuations.
While the public launch has been widely described as an IPO, the offering was actually a Direct Public Offering (DPO). Benjamin Leff, Chief Operating Officer of Sheesha Finance, explained that: “some of the main differences between IPOs and Direct Public Offerings (DPOs) are that IPOs create new shares to be sold on the market and those shares are underwritten by an intermediary.”
“With a DPO, companies do not have to pay underwriting fees and instead sell their shares directly on the market with no intermediary. A point to note for DPOs is that no new shares are created, existing shares are sold directly.”
“Cryptocurrency Advocates … Are Celebrating the Watershed as Vindication of Their Long-Held Belief in Their Cause’s Potential.”
In any case, the public offering is widely believed to be a watershed moment for crypto. “Today was a moon landing for cryptocurrency bulls, ultimately ushering in a new era of investors and lending credence to the narrative that crypto is more than just a vehicle for speculation and has the potential to revolutionize the way payments are processed,” said Jonathan R. Wiley, Director and Head of Investments at Arch Global Advisors, in an email to Finance Magnates.
“Enthusiasm at the open, faded late in the day, which didn’t surprise us when the valuation hit $100 billion. That’s a rare company. We are cautioning investors to expect significant volatility in the days ahead.” Still, “unlike many IPOs that often take years to become profitable, the company is already doing just that, which is impressive.”
Of course, it is true that Coinbase’s public offering is only the latest in a series of crypto being embraced by the “mainstream.” In 2021, Tesla added BTC to its balance sheet, and celebrity artists raked in millions of dollars from NFTs. Paypal has started to allow users to pay merchants in crypto, and Visa started settling transactions on the Ethereum network. Before then, in 2020, a slew of companies bought massive amounts of Bitcoin.
But, perhaps Coinbase’s public offering is different. As the NYT reported, “Cryptocurrency advocates … are celebrating the watershed as vindication of their long-held belief in their cause’s potential.”
3/ With 56M users, that makes Coinbase larger than Robinhood, CashApp, and Venmo!
— Dan Held (@danheld) April 13, 2021
What Does the Launch of Coinbase IPO Really Mean For the Crypto Industry?
Huobi Co-Founder Du Jun agrees. Jun told Finance Magnates that: “as one of the most widely recognized crypto brands in the West, Coinbase’s public offering underscores a major shift in the global financial infrastructure as more and more people embrace digital assets.”
“We’ve seen this shift accelerate in many of the markets we serve, but this moment marks the dawn of mainstream crypto adoption,” he said.
Jun told Finance Magnates that the success of the IPO so far signifies a major appetite for investors to get into the cryptocurrency space. “The market’s demand and excitement leading up to this IPO prove that there is a huge appetite for digital assets from retail and institutional investors alike,” he said. “Digital assets will soon become an important component of every diversified portfolio, just like gold, bonds and other alternative assets.”
And indeed, analysts have been saying for several months that the Coinbase IPO could act as a channel into crypto for retail and institutional investors who may be hesitant to hold crypto directly. Similar assets, such as stocks in cryptocurrency mining companies, seem to have gained popularity for similar reasons throughout 2020 and 2021.
“We anticipate that all of the attention around this IPO will drive regulators to get more involved with digital assets, which we actually believe is beneficial for the industry,” he said. “A move toward a more standardized and defined regulatory landscape will make it easier for exchanges like ours to provide users with a safe, secure and reliable trading experience and ensure the industry’s long-term sustainability.”
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”There Is Still a Significant Probability That Bitcoin Is Worth $0.”
And indeed, while the launch of Coinbase’s IPO may have been a success, there is still quite a lot of regulations that need to be developed before cryptocurrencies can truly become an integral part of the financial world.
Jonathan R. Wiley, Director and Head of Investments at Arch Global Advisors, told Finance Magnates that indeed, “the IPO gives investors easier access to crypto which could drive the price higher in the short-term.”
However, “there are still significant risks in this asset class, especially with government regulation looming. Until there is more clarity, they are selling pans to prospectors,” he said. “There is still a significant probability that Bitcoin is worth $0. More widespread acceptance is needed to prevent the bubble from ultimately bursting. It could take a while before the mania wanes.”
“As More Trusted Traditional Players Signal Acceptance of Crypto, You’ll See an Increased Demand for Bitcoin and Other Cryptocurrencies.”
In the meantime, though, Bitcoin seems to be riding high, quite possibly because of the success of the Coinbase IPO. At press time, BTC was trading at roughly $63,000. After spending several weeks below $60K, Bitcoin regained the level on Saturday and has held fairly strong above it throughout this week. At its highest point, BTC crossed $64K for the first time on Wednesday.
Why exactly could the Coinbase IPO be a boon for Bitcoin? Andrew Kiguel, the Chief Executive and Co-Founder of Tokens.com, told Finance Magnates that “the acceptance of the Coinbase IPO at a $100 billion valuation signals to a mass audience an acceptance by Wall Street of bitcoin and crypto in general.”
“Bitcoin always rallies when traditional companies such as Paypal, Tesla or Visa signal to their followers that bitcoin is legitimate and here to stay,” he said. “The Coinbase IPO is another anecdote to support that narrative and change the view of crypto sceptics and those on the sidelines, waiting for further validation of this sector.”
However, in the grand scheme of things, BTC’s rise in the wake of the Coinbase IPO may only be a drop in the bucket.
“The new high is only (so far) slightly above the previous high,” Kiguel said. “As more trusted traditional players signal acceptance of crypto, you’ll see an increased demand for bitcoin and other cryptocurrencies.”
“A key item to keep an eye on is when the SEC will approve a bitcoin ETF in the US. This happened in Canada and billions of dollars rapidly entered the space. In the US, we would expect several billion dollars to flow in an approved ETF – all of which would need to be deployed into buying bitcoin and likely causing it to reach new all-time highs much higher than what we are seeing today.”
One of the “Most Significant Events in Bitcoin’s History.”
Many analysts agree that the introduction of a Bitcoin-based ETF to the US would bring huge amounts of capital to Bitcoin. While institutions and corporations that are interested in Bitcoin have found ways to invest in it, an ETF seems to be a sort of “holy grail” of crypto investments.
In an interview with Finance Magnates earlier this year, Anchorage President Diogo Monica said that a Bitcoin ETF at this stage in the game “is a little bit behind the curve,” because “a lot of the people that wanted to have Bitcoin exposure have already gotten Bitcoin exposure.”
Still, a Bitcoin ETF in the United States will be a major point of influence on Bitcoin and crypto markets as a whole. “It will create price competition. There are a lot of premiums on the current funds in the market that may come down whenever there’s an ETF. The ETF competition itself may also be better for the space.”
And, at the end of the day, a Bitcoin ETF could provide a larger group of institutional and corporate investors with a regulated path to Bitcoin.
While retail investors play a key role in Bitcoin markets, institutional and corporate investors are widely believed to be the key to further growth. Indeed, Christopher Matta, President of 3iQ Digital Assets, told Finance Magnates that: “continued adoption from institutional investors has been a catalyst for the space.”
“Most recently, Morgan Stanley’s Private Wealth platform, which has trillions of dollars under management, added bitcoin investment vehicles for their clients,” he said.
“Many other institutional platforms are now starting to explore bitcoin solutions, potentially unlocking huge swaths of new investors and assets into the bitcoin ecosystem. This level of institutional adoption in addition to the Coinbase IPO are two of the most significant events in Bitcoin’s history.”
What are your thoughts on the significance of Coinbase’s public offering in terms of Bitcoin’s history? Let us know in the comments below.