Coinbase employees spray champagne during the initial public offering (IPO) outside the Nasdaq MarketSite in New York, USA, on Wednesday, April 14, 2021.
Michael Nagle | Bloomberg | Getty Images
Coinbase shares rose in pre-trading on Thursday, a day after the cryptocurrency exchange was placed on a live listing.
The firm’s share price climbed nearly 8% to about $ 353.27 at 7 p.m. ET. Coinbase was briefly valued at as much as $ 100 billion in its Nasdaq debut on Wednesday, a major event for the cryptocurrency industry. The stock closed at $ 328.28 per share, and Coinbase was valued at $ 85.8 billion on a fully diluted basis.
Investors are responding to the news that Ark Invest founder and CEO Cathie Wood loaded approximately $ 245.9 million worth of Coinbase shares on the company’s first trading day. Wood has been a bitcoin bull for many years, and believes bitcoin and other digital signs could eventually become part of the recommended portfolio for everyday investors.
Coinbase’s debut is seen as a “watershed moment” for crypto, after years of skepticism from Wall Street giants and global regulators. But there are concerns that volatility in digital assets and uncertainty over the regulations could weigh on the company’s share price in the long run – as well as fierce competition from other players such as Binance, Kraken and Gemini.
“Risk management from a regulatory and operational perspective is much better on Coinbase” compared to its competitors, Carol Alexander, a professor at the University of Sussex Business School, told CNBC’s “Squawk Box Europe” on Thursday.
“They also have this solid revenue stream from the fees and custody services. There is no real competitor for them on the central wallets, because Kraken, Gemini – I do not think they are the next to go.”
Coinbase generated an estimated revenue of $ 1.8 billion in the first quarter of 2021, a ninefold increase over the same period a year earlier, while profits increased from $ 32 million to between $ 730 million and $ 800 million. The number of Coinbase users trading monthly rose to 6.1 million from 2.8 million three months earlier.
BTIG analysts on Thursday gave Coinbase a “buy” rating and a price target of $ 500 – 50% higher than the company’s closing price on Wednesday.
“We believe that COIN, the most popular cryptocurrency exchange in the US, facing consumers, is positioned as a primary beneficiary of the increasing acceptance of Bitcoin and other digital assets as it continues to scale in the US and internationally, “writes the brokerage firm in a note.
At the same time, the company has several ways in which it can build on its first position as a ramp for mainstream crypto investors by diversifying its revenue stream away from transaction fees (96% of 2020 net income) and leveraging its increasing robust platform for institutional investors, whose adoption of crypto is a key driver for growth going forward. ‘
Bitcoin bulls are attracting more mainstream investors who are warming up the crypto space. Tesla made a $ 1.5 billion bet on bitcoin earlier this year, while major US banks such as Morgan Stanley and BNY Mellon launched crypto services for their customers.
The most popular digital currency reached a record high of more than $ 64,000 before the debut of Coinbase on Wednesday, but has since slightly reduced its profit to trading around $ 62,473. Yet it has more than doubled since the beginning of the year. But while proponents of bitcoin see it as a value-value similar to gold, opponents argue that it could be one of the biggest market bubbles in history.