Bloomberg
Coinbase sails $ 100 billion worth of Crypto Frenzy
(Bloomberg) – Wall Street seems to be on the verge of finding 100 billion new reasons to believe in Bitcoin. Coinbase Global Inc., the fast-growing exchange in the midst of speculative madness in cryptocurrencies, is expected to be revealed this week at a staggering valuation of about $ 100 billion. It’s more than the venerable New York Stock Exchange and Nasdaq Stock Market combined – for a company that did not even exist a decade ago. If all goes according to plan, the scheduled direct listing on Nasdaq on Wednesday will confirm Coinbase’s position as the Big Board. of the American crypto scene and a powerful symbol of the risks and benefits of the new era of digital money. Its founders, Brian Armstrong and Fred Ehrsam, own $ 15 billion and $ 2 billion, respectively, according to Bloomberg estimates. The conclusion of the San Francisco Stock Exchange seems to justify the high valuation, at least recently. Coinbase said last week it expects to report a profit of $ 730 million to $ 800 million in the first quarter, more than double what it earned throughout 2020. And revenue in the first three months of 2021 probably exceeded the total of $ 1.3 billion for last year. . That compares with the $ 5.6 billion in revenue that Nasdaq generated last year. Cooinbase has 56 million verified users and adds about 13,000 new retail customers a day, according to cryptocurrency analysis firm Messari. Mira Christanto, an analyst who covers the company for Messari, said in a research report. “The market has shown that investors are hungry for crypto exposure through stock markets.” This is an astonishing increase for a company that was started in 2012 in an apartment in San Francisco by Armstrong and Ehrsam, who met online in a Bitcoin forum on Reddit. The apparent demand for Coinbase shares reflects the appetite for all cryptocurrencies: Bitcoin has nearly quadrupled in the past year, hitting a record $ 61,742 in mid-March. The opportunity for Coinbase now is to capture the growing number of institutional and corporate customers. such as MicroStrategy Inc. and Tesla Inc., which buys Bitcoin for the long term. “It will be the Holy Grail for them if they can hold on to the business, because people are seen more as containers than traders,” said Julie Chariell, a senior analyst at Bloomberg Intelligence for fintech and payment businesses, saying the provision of additional products such as conservation services, according to Chariell, could mean more to a bank than a stock exchange within a few years. “It’s a broader play to become a one – stop shop for everything you want to do with your cryptocurrencies,” Coinbase spokeswoman Elliott Suthers declined to comment to any company official, citing the ‘quiet period’ Coinbase. It’s a long and sometimes grueling road to the planned debut, and there are still risks to its business model. Coinbase has revealed in the share sale documentation that it is suing the Securities and Exchange Commission. According to a person familiar with the matter, the investigation involved XRP, the digital sign created by Ripple and which is the subject of an SEC lawsuit alleging that it was sold as an unregistered security. The same month, the SEC announced that it was suing Ripple and two of its founders for violating U.S. security laws. Coinbase was forced to withdraw XRP, which at the time was the third most valuable cryptocurrency in the world. It’s hard to tell how the loss of XRP affected Coinbase’s earnings, as Bitcoin skyrocketed at the same time, Bloomberg Intelligence said. Chariell. A greater risk is the need to withdraw many of the alt coins Coinbase now offers if the SEC case determines that XRP is a security. ‘ It’s definitely a risk, but I just think it’s not a big risk point, ”she said. Despite the XRP investigation, Coinbase’s expansion plans seem to be working. According to the SEC filing, the currencies, excluding Bitcoin and Ether, made up the largest revenue share in 2020, at 44%. “It made economic sense for Coinbase to list tokens with high demand due to greater competition from other exchanges,” said Messari’s Christanto. Bitcoin Link Another risk: Coinbase’s fortunes are consistent with the volatile history of Bitcoin. The exchange only made a profit last year as institutional demand for cryptocurrencies drove Bitcoin and other currencies such as Ether to new highs. The recent sluggish years, known as the crypto-winter, stretched from 2018 to 2019, with Bitcoin hitting a low of around $ 3,100 in December 2018. Until then, Coinbase was known for listing only the major victims in the crypto world, including Bitcoin, Litecoin. and the prospect of Ether.Coinbase will not amount to a single character like XRP. The bulk of its revenue comes from trading fees, with retail customers charging an average of 1.4% and institutional customers around 0.05%, according to Christanto. To get it through the lean years, Coinbase has done seven fundraising rounds for a period of more than Messari research shows since September 2012 $ 500 million. This is in addition to the revenue from the sale of Bitcoin and Ether, which according to Messari more than tripled last year to $ 134 million, and this has given Coinbase a strong financial position to list publicly. Based on figures provided by the company, Chariell calculated that 5.5 million monthly users equals $ 3 billion in 2020 revenue. The top 12 fintech companies that became known over the past six months had the price-to-sales ratio of 36 times, she said. If you multiply the income by 2020, you get a very large number. “You have more than $ 100 billion in market capitalization,” she said. For more articles like this, feel free to visit us at Bloomberg.com. Sign up now to stay ahead of the most trusted business news source. © 2021 Bloomberg LP