For many investors, Coinbase Global Inc. ‘s trading debut next week will be an entry into the $ 2 billion cryptocurrency market.
And for those who have already devoured Bitcoin, the arrival of the largest U.S. cryptocurrency exchange on the Nasdaq stock market may be necessary to settle portfolios notorious for the infamous asset class volatility.
There are also other stocks attached to the pieces and grips of the various blockchains. Elon Musk’s Tesla Inc. and Michael Saylor’s MicroStrategy Inc. both added value to Bitcoin’s billions in particular to their treasuries. But with the public listing of Coinbase, investors will have the choice of a stock linked to cryptocurrencies. So this is the hope go – less likely to lead persistent cycles of boom and chest.
“For a crypto investor who also buys stocks, it can diversify risks, because there is a very profitable exchange platform that trades elsewhere (stock exchange) from which the flow of buyers and sellers can be less correlated than many cryptocurrencies. prices, “wrote Greg Foss, a veteran credit trader, Bitcoin investor and chief financial officer of Validus Power Corp., in an email to questions.
Coinbase plans to make a direct listing in which it will not raise any new capital, he said in an S-1 submission. The direct listing allows current shareholders to trade their shares without a lock-in period typical of an initial public offering. It is approximately appreciated $ 90 billion in the last week he traded on Nasdaq’s private market, Bloomberg News reports.
Because volume and price tend to go hand in hand, Coinbase’s transaction revenue, the largest segment, may still be susceptible to cryptocurrency market reversal.
“In a traditional equity portfolio, exposure is given to a stock exchange platform that generates trading fees on crypto,” Foss wrote. “These fees go up with volumes and volumes usually go up with prices, so there’s a beta trade there.”
Coinbase said on Tuesday it expects to report a first quarter profit of $ 730 million to $ 800 million, more than double what it earned throughout 2020. The bumper quarter for the stock market comes amid rising cryptocurrency prices. The Bloomberg Galaxy Crypto Index, which tracks Bitcoin, Ether and six other cryptocurrencies, has advanced by more than 100% in each of the last two quarters.
Forecasts for Coinbase market capitalization against stock exchanges
Coinbase could have a further appeal for investors. According to Gil Luria, head of institutional research at DA Davidson & Co., the exchange could provide an accessible diversified investment in space, where there is an increase in cryptocurrency tokens and few passive vehicles.
“Coinbase will win no matter which cryptocurrency emerges as the winner, and their revenue is more tied to trading volumes, which are often less volatile than asset values,” Luria wrote in an email.
But investors who want to add stability to their cryptocurrency portfolios may want to be patient.
Kevin Kelly, global head of macro strategy at research firm Delphi Digital, warns that those who want a lower volatility investment may want to trade the first week of Coinbase.
“I expect to see a lot of volatility next week once COIN starts trading, but eventually I think we will see more trading in line with the broader crypto market,” Kelly said in an e-mail. post written. ‘However, I see it as a lower beta game on the continued expansion of crypto with less negative risks to crypto asset prices; in other words, COIN is more agnostic for crypto-asset prices and could be an attractive opportunity for investors who want to gain exposure to the continued adoption of crypto without tackling similar levels of price volatility. ”