LONDON (Reuters) -Coinbase Global Inc, the largest US cryptocurrency exchange, will list on the Nasdaq on Wednesday, which is a milestone in the journey of virtual currencies from niche technology to mainstream asset.
The listing is by far the largest yet of a cryptocurrency company, with the San Francisco-based firm saying last month that private-market transactions valued the company at about $ 68 billion this year, up from $ 5.8 billion in September.
This is the latest breakthrough for the adoption of cryptocurrencies, an asset class that was avoided by mainstream financing only a few years ago, according to interviews with investors, analysts and executives.
“The listing is important because it indicates the growth of the industry and its acceptance in the mainstream industry,” said William Cong, associate professor of finance, at SC Johnson College of Business, Cornell University.
Bitcoin, the largest crypto-currency, hit a record high of more than $ 63,000 on Tuesday. It has more than doubled this year as large investors, banks from Goldman Sachs to Morgan Stanley and domestic companies like Tesla Inc. are hot for the emerging asset.
The direct listing of Coinbase – which means it has not yet sold any shares before its debut on the market – is likely to speed up the process, those interviewed by Reuters said, raising awareness of digital assets among investors.
“This is a very positive thing for bitcoin in itself, because it proves the bridge built from an esoteric, left-of-field arena, full of cowboys, to mainstream financing,” said Charles Hayter of the data firm CryptoCompare said.
Yet some institutional investors have sounded warning about long-term prospects for Coinbase and the crypto sector.
Swiss asset manager Unigestion has said it is wary of the hype surrounding cryptocurrencies, which is why it will not buy Coinbase shares.
“We think there’s a lot of madness and exuberance in everything that looks like crypto,” said Olivier Marciot, a portfolio manager at Unigestion, which oversees $ 22.6 billion in assets.
“Hedge funds and retailers are likely to be in these new stocks for the first time – probably buying quite heavily on them – which should not be a clear indication of what it will be like in the long run.”
BEHAVIOR TO BITCOIN?
Other experts said risks include exposing Coinbase to a highly volatile asset that is still subject to spot regulation.
Founded in 2012, Coinbase boasts 56 million users worldwide and an estimated $ 223 billion in assets on its platform, which, according to legal records, make up 11.3% of the crypto-asset market share.
The company’s latest financial results highlight how revenue increased increasingly with the rise in bitcoin trading volumes and prices.
In the first quarter of the year, when bitcoin more than doubled in price, Coinbase estimates revenue of more than $ 1.8 billion and net income between $ 730 million and $ 800 million, compared to revenue of $ 1 , 3 billion for the whole of 2020.
“The correlation with bitcoin will be very high after the stock stabilizes after listing,” said Larry Cermak, director of research at crypto website The Block.
“If the price of bitcoin goes down, it’s inevitable that Coinbase’s revenue and inherent price of the stock will go down as well.”
Regulatory risks also threaten, others said, as Coinbase increases the number of digital assets users can trade on its platform.
Coinbase suspended trading in major digital currency XRP last year after U.S. regulators sued associate blockchain firm Ripple for an unregistered $ 1.3 billion security offering. Ripple denied the charges.
“Given the expansion of the assets covered by Coinbase, it is almost inevitable that other listings will be called into question,” said Colin Platt, chief operating officer of crypto platform Unifty.
Coinbase declined to comment.
Reporting by Tom Wilson and Anna Irrera Editing by Nick Zieminski