Coinbase began its journey by helping users to purchase Bitcoin. Fast-forward 8 years and consumers will be able to buy part of the company, with Coinbase’s IPO aiming to do the rounds for a while now.
The company filed an IPO prospectus with the Stock and Exchange Commission on 25 February 2021, reporting that Coinbase has some $130 million worth of bitcoin under its belt. According to Ecoinometrics, with respect to the BTC price as at 31 December 2020, Coinbase keeps about 4,342 BTC. At press time, the same value amounted to about $212 million.
In the light of the upcoming trading plans and the market success of Bitcoin, it is worth looking at whether the long-term growth of Coinbase and Bitcoin is going to go hand-in-hand.
Positioning for Growth and Success through Bitcoin, or not?
Coinbase has long been synonymous with Bitcoin and other cryptocurrency properties. Fundamentally, increase in Bitcoin’s price is projected to have a positive effect on Coinbase as well. However, as the Ecoinometrics article referred to above was swift to point out, the BTC position of the exchange is comparatively lower than that of the other parties on the Bitcoin treasury list.
Although the company could eventually increase its role in Bitcoin, a smaller position makes sense, particularly after the decline of last week.
Take, for example, Microstrategy and its treasury of more than 90,000 BTCs, i.e. 0.4 per cent of the total circulating stock. As Bitcoin plunged in the markets over the past week, MSTR’s shares also collapsed dramatically, dipping almost 50 percent from the peak. MicroStrategy’s strong role in the BTC ended up dictating its stock as well, which is something that Coinbase will want and prevent.
Coinbase: Revenue Cycle Structure
As an exchange, Coinbase’s business period clearly doesn’t depend on bitcoin going up. The business collects fees and royalties as people acquire and sell digital properties on the website.
Coinbase charges high margin rates of about 0.50 per cent for crypto-purchases and sales. There is also a premium for Coinbase, which is a commision paid on all crypto transactions, charged in addition to the spread. Coinbase Commerce recently introduced the website, supplying online merchants with tools that enables them to accept digital asset payments. In addition, the exchange has its own USD coin or USDC, which is a stablecoin based on the Ethereum.
Coinbase rang up $1.3 billion in 2020, according to its SEC filing. As a result, once digital assets are important, Coinbase’s companies can also flourish.
The idea of direct listing and Banking on Bitcoin?
When Coinbase opted to opt for a direct listing rather than a subscription to an investment bank, it implicitly shared the narrative of being a ‘people’s exchange,’ while defending its 2013 slogan – Welcome to the Future of Finance.
With a direct listing strategy, Coinbase will welcome greater liquidity while at the same time instilling a degree of openness that would allow the exploration of organic pricing for its stock on the exchange.
Would Coinbase’s IPO be more successful if Bitcoin’s price rallies take place at the same time? It’s totally. However, the exchange is now becoming a common institution in crypto-space, and this observation means that it already enjoys a degree of trust between its customers, both current and future, regardless of how Bitcoin can do on charts.
Collective development in cryptocurrencies is going to write the success story of Coinbase, but it would really be wrong to say that everything depends on Bitcoin.
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