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Coinbase going public: A new way to get broad crypto exposure?

Posted: 10 July 2020 5:04 pm
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Most other public crypto companies are full Bitcoin but Coinbase not so much.

According to Reuters, citing anonymous sources, Coinbase is planning to go public in the near future via a direct listing, instead of a traditional initial public offering, for immediate public trading.

The sources said Coinbase could pursue the listing in late 2020 or early 2021.

While Coinbase has not yet registered its intention to go public with the SEC, sources say it's in talks to hire investment banks and law firms. It's also reportedly planning an investor day on 14 August, which could suggest that the public listings are due to arrive sooner rather than later.

Coinbase's last private fundraising round, in October 2018, gave it a price tag of $8 billion.

Crypto picks and shovels

If the reports hold water, Coinbase would be the first US cryptocurrency exchange to go public – if you don't now count Square and soon plan to count PayPal as crypto exchanges – and one of the largest cryptocurrency entities to ever go public.

As well as being undeniably exciting for a lot of speculators, the news also stands to see a lot more public information on Coinbase's finances, as well as presenting a new way for speculators to get broad exposure to cryptocurrency as a whole.

To date, the field of publicly traded cryptocurrency companies has been very heavy on Bitcoin mining outfits, such as Hut8 and Riot Blockchain, whose fortunes and share prices are directly tied to Bitcoin prices anyway.

If Bitcoin prices do well, these companies still have to deal with their competitors who are also doing well. If Bitcoin prices do poorly, these companies do poorly. So far, investing in crypto mining stocks has functionally been a way of getting exposure to Bitcoin prices without the chance of owning Bitcoin and with many additional risks.

The self-induced misadventures of Canaan, a crypto mining manufacturer, following its IPO can attest to these many additional risks.

Coinbase is considerably more diverse though. It has its own growing DeFi ambitions, it can offer its own Visa cards without intermediaries like Wirecard, there's not a lot stopping it from playing in the remittances space and so on. While many are probably very used to associating Coinbase's fortunes with Bitcoin's, there's a lot more going on here than there is in most other public blockchain companies.

So in a very roundabout way, this raises the question: to what extent will Coinbase share prices be a reflection of Bitcoin prices? A few years ago, they would have been completely inextricable. For example, it's believed that Coinbase made $1 billion in revenue in 2017, a full 43% of which came from the frothy month of December, and most of which would have come from selling Bitcoin to the hyped up crowds chasing its gains.

But the year 2020 has painted a much different picture, with DeFi tokens including that of Compound (a Coinbase subsidiary), Kyber Network and other DeFi projects decisively moving on their own without Bitcoin's assistance.

The cryptocurrency ecosystem is evolving, and in the end, Coinbase going public might act as another key force in the ecosystem's maturation.



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Disclosure: The author holds ETH, BNB, BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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