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Analysts believe Coinbase’s Nasdaq listing will have a disproportionately positive effect because it will serve as a gateway for legacy investors to enter the crypto market.
Coinbase, the leading cryptocurrency exchange in the United States, will become a publicly traded business on April 14 when the COIN portfolio is listed on the Nasdaq stock exchange.
In general, both the crypto and standard stock markets have been largely optimistic about the listing. With the date just a day away, analysts have been issuing a range of viewpoints on how the listing could affect Bitcoin and altcoin prices.
Coinbase rally, crypto top?
Coinbase is not holding an initial public offering (IPO).
Instead, the exchange would list directly on the Nasdaq, avoiding the need for companies to deal with investment banks, which may be expensive.
Despite the lack of participation of investment banks in the Coinbase listing process, there is a lot of buzz around COIN.
Jim Cramer said on CNBC’s Squawk Box on April 12:
“You gotta buy Coinbase when that deal comes. Even though it’s a $100 billion deal, this has become common knowledge that there are many companies that are going to switch. MicroStrategy has always been the leader, so others would want to follow.”
— Squawk Box (@SquawkCNBC) April 12, 2021
There are many reasons why conventional stock market investors are bullish on COIN.
The two most important reasons are the ability to gain entry to the crypto industry without buying cryptocurrencies and Coinbase’s profitable business model.
According to Jarvis Labs co-founder Ben Lilly:
“Coinbase is the watershed moment in terms of legitimizing some valuations you see in crypto, particularly around DEXs who have a tiny fraction of the amount of employees and opex [operating expenses] that a Coinbase or ICE has. Crypto is an asset with incredible volume and diversity, which is poised to grow even more. Coinbase showcases how profitable exposure to this market can be. Also, I expect a wave of M&A and VC activity on the heels of this as private investors will be asking their fund managers for exposure to this space.”
A financial researcher from John Street Capital, a venture capital firm, noted that Coinbase is massively profitable, with an annual revenue of $1.8 billion.
Coinbase has a much wider user base than Cash App and Venmo, in addition to a convincing accounting statements and sales.
With the exception of JPMorgan Chase, Coinbase has the largest customer base of any financial entity in the United States. The following is what the researcher wrote:
“The @coinbase team announced 1Q21 data including revenue of ~$1.8B, adj EBITDA of $1.1B, NI of $730-$800M, trading volume of $335B & assets on the platform of $223B (11.3% of cryptoasset market) with 56M users Run-rate of $7.2B in revenue / $4.4B in EBITDA / $3.0B of NI. The 56M user # is bigger than @CashApp & @Venmo and significantly larger than @RobinhoodApp & @eToro . That’s greater than every bank not named $JPM.”
While some traders think crypto will hit a peak following the Coinbase listing, investor sentiment against the listing is extremely optimistic.
Ben Lilly responded to a question about the importance of the Coinbase listing by saying:
“You always need that bridge. How legacy markets value a company that operates in crypto is that bridge. Now legacy investors can walk across the bridge and realize it’s an untapped ocean of investable assets. They might not invest right away, but their framework for how to value something gets easier.”
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, believes the Coinbase “IPO” could boost Bitcoin to $70,000. He said:
“Coinbase IPO May Boost #Bitcoin to $70,000, Like #Tesla to $60,000 — The lowest 30-day volatility since October indicates Bitcoin is ripe to exit its cage and bull-market continuation is favored for the next $10,000 move. Similar to Tesla’s equity-wealth allocation to Bitcoin..”
How did Galaxy Digital perform when it listed on Canada’s stock exchange?
Galaxy Digital, owned by billionaire businessman Mike Novogratz, is another cryptocurrency company that went public in the last year.
Galaxy Digital’s stock has increased more than twentyfold since it was listed on the Canadian stock exchange.
While the business models and market capitalizations of the two firms at launch are vastly different, this demonstrates that there is competition in publicly traded crypto-focused businesses at launch, which would more certainly be mirrored in COIN’s valuation.