In some ways it is Coinbase exchange is the poster child for the crypto industry. It has embraced – not fought – regulation that sets it apart from most cryptocurrency exchanges, while praising the company’s trading app for its ease of use. When JPMorgan Chase decided to expand traditional banking services to crypto companies in the US earlier this year – a precedent-setting move – it started with Coinbase and Gemini, another listed US stock exchange.
Therefore, last week’s report that Coinbase submitted a draft registration for an initial public offering to the United States Securities and Exchange Commission was not really a surprise, but it’s big news nonetheless – and not just because research firm Messari declared the $ 35 million – customer company could be valued at $ 28 billion.
“It’s a massive event,” said Vladimir Vishnevskiy, director and co-founder of Swiss asset management firm St. Gotthard Fund Management AG, to Cointelegraph, and not only in the United States but also in Europe, because “the IPO will provide a marker as to how markets are ready to value such companies.”
Stephen McKeon, a professor of finance at the University of Oregon and a partner at Collab + Currency, told Cointelegraph: “Coinbase represents the first crypto-native company to be listed on a major US stock exchange,” and as such its listing “will be significant event for the industry ”- provided, of course, that the offer proceeds as planned.
Meanwhile, Edward Moya, a senior market analyst at forex trading company Oanda, told Cointelegraph: “It looks perfect after the strong breakthroughs with Bitcoin’s widespread acceptance, high demand for cryptocurrencies and growing institutional interest.”
That said, Coinbase, like other so-called unicorns, will now face “a lot of control,” Moya added, simply because the IPO market has become so popular recently. In fact, some are already calling the market “Tech Bubble 2.0“And do comparisons with the insane lists of Internet companies under the dot.com bubble of the late 1990s.
“There’s a lot of hot money out in the markets right now,” Vishnevskiy confirmed, and given the strong appetite for IPOs, he expected the offer to be oversubscribed. According to McKeon, “The premiums on the Grayscale and Bitwise funds suggest that there is a huge appetite for exposure to crypto in the stock markets, which should promote a warm reception of the Coinbase stock.” He added:
“IPO activity is cyclical, it fluctuates between hot and cold markets. We are currently in the middle of one of the hottest IPOs in recent years. Combined with Bitcoin at all-time highs, this makes for a very appropriate time for Coinbase to go public. “
Due to Covid-19-related stimulus efforts, the global economy is flooded with liquidity with not many places to invest. Bond yields are almost zero. In this environment, public demand for investments in innovative high-growth technology companies such as Coinbase is strong.
Concerns about service interruptions
Is there anything that can derail the process? “If there are some unforeseen circumstances, such as widespread media coverage of a new (or mutated) infection, it could make market observers very risk-averse, making them less likely to put their money into an IPO,” said Charles Bovaird, vice president of content at Quantum. Economics, told Cointelegraph.
Moreover, Coinbase has repeatedly done so gone down in periods of high demand, which Bovaird recalled. Back in 2017, when the SEC rejected Winklevoss’ Bitcoin (BTC) exchange traded funds and BTC prices subsequently crashed, many investors including Bovaird were unable to trade through Coinbase. This may help to assess investors’ assessment during an IPO, as capacity problems still challenged the stock exchange in 2020.
Additionally, “Coinbase has a public image issue that they will have to clean up, and that may not be easy to do,” Moya added. New York Times reported in November that some of Coinbase’s black employees had expressed concern about discriminatory treatment, and during 2020 the employees were also “deterred from discussing causes or politics internally and from taking activist causes to work ”- as everyone could raise some managerial concerns in the minds of potential investors. Moya told Cointelegraph:
“Next year, companies need to embrace diversity and inclusion, and until Coinbase can do that, they may miss out on taking full advantage of this opportunity.”
Vishnevskiy disagreed that Coinbase had an image problem and said the company would be considered one of the “more secure cryptocurrencies” if the IPO went through. “Interest from Europe is likely to be more subdued than in the US,” which is the norm given the more conservative investment trends among European investors. “Nevertheless, I can confirm that I already know a couple of family offices in Europe who are interested in getting an award,” he told Cointelgraph.
Bovaird added that as an investor, he would not care about personnel policies, or whether employees are allowed to hold political talks, he adds. “I do not care if I can not use their site to buy (or sell) Bitcoin whenever I want.” Although institutional investors actually prefer a “laser focused“CEO like Coinbases Brian Armstrong, retail investors who have been a big factor in the current IPO, “madness” may think differently.
Gets new participants
Would a publicly held Coinbase drive more users to cryptoverse? “This could spur the adoption of crypto,” John Griffin, who has James A. Elkins’ 100th year of finance at the University of Texas, told Cointelegraph because companies that survive the IPO process – with its months of control from regulators, analysts and institutional. investors – often emerges hugely tested and a safer investment, at least in the minds of some investors. For comparison, “Look at WeWork,” Griffin suggested, “it could not survive the scrutiny of a public listing and crumbled.”
Digital assets as well as IPOs have appeared at near-record levels by 2020, and “this event could bring a number of new entrants to the space that previously focused only on IPOs,” Vishnevskiy said. According to McKeon, the risk appetite for both areas is very similar, adding: “A Coinbase IPO will further validate the cryptocurrency action class for the public, which is likely to lead to further adoption.” However, one should not expect a successful Coinbase IPO to solve all the problems of the industry. As Griffin told the Cointelegraph:
“This is definitely a step towards legitimizing crypto and moving to the mainstream. A major problem is that while exchanges like Coinbase are under regulatory control, [other] exchanges that drive prices may be under some control. This means that the market is still open to manipulation. ”
Overall, however, most close observers viewed a Coinbase IPO as a signal performance for the cryptocurrency and blockchain industries. One is reminded of the failure of other crypto-native lists like Bitmain and BitConnect as well as Ripples long awaited but still unseen IPO. “Some have failed for dishonest reasons, others because of a difficult US regulatory environment,” said Moya, who then added that anything that drives interest in crypto is a welcome development for the industry.
The listing is an important event, and according to Griffin, “it shows that Coinbase’s path to work in the legislative process is economically viable.” Meanwhile, John Sedunov, associate professor of finance at Villanova University, told the Cointelegraph:
“An IPO on Coinbase would be a signal of a further move to the mainstream of cryptocurrency. I do not think this will push it over the finish line, but it will help continue the process of making cryptocurrency more accessible to investors and potential users. ”