In preparing for Coinbase’s debut on Nasdaq, COIN’s benchmark price was set at just $250, with all employees receiving 100 shares each. As befits a cryptocurrency, the early days of COIN were characterized by volatility, with the share price reaching $430 within minutes of the start of trading.
However, after this positive price movement, the value of COIN fell sharply – and within hours – and eventually ended its debut at a cool $328. Since then, COIN has continued to fluctuate between $320 and $345, and exactly one week after listing, it landed at the bottom of that range. At the time of writing, the stock’s total market capitalization was estimated at just under $64 billion, slightly less than the previously estimated $100 billion.
A real breakthrough or just a hype?
The debut of COIN in the traditional financial sector is widely seen as a major breakthrough for the cryptocurrency industry, especially since it teaches investors – who may not be interested in trading digital assets – about the indirect impact of cryptocurrencies.
Jelle Pol, project manager for Shell’s first three oil and gas projects and CEO of Dusk Network – a private protocol – told Cointelegraph that Coinbase’s direct listing could be a very interesting signal for companies and regulators who still hold the view that anything crypto related is bad.
COIN’s market capitalization now exceeds the combined valuation of most of the world’s largest traditional securities exchanges, over years, not decades. Clearly they operate to the highest standards, otherwise a Nasdaq listing would have been out of the question. So it seems that self-regulation has borne fruit in this case.
With Coinbase’s listing potentially bridging the gap between the traditional financial sector and cryptocurrencies, a growing number of major players seem to be pretty bullish about COIN. For example, Ark Invest, a New York-based asset management firm, has quickly put more than a million shares into circulation (currently worth about $350 million), spread across three exchange-traded funds offered by the firm.
In addition, it is worth noting that US venture capital firm Union Square invested in Coinbase in 2013 at $0.20 per share, essentially allowing the company to increase its total revenue to over $4.6 billion today.
The company’s biggest backer so far is venture capital giant Andreessen Horowitz, through its A16z cryptocurrency fund, which owns about $9.7 billion worth of cryptocurrency shares. According to Coinbase’s prospectus, just seven months after closing its Series A funding round, A16z led a Series B round for $25 million, buying back shares at $1 each.
Then in October 2019, the company was able to buy $57.1 million worth of shares from Union Square at $23 per share and just 12 months later another $30 million from Coinbase at $28.83 per share.
Outside of Union Square and A16z, tech-oriented venture capital firm Ribbit Capital is Coinbase’s third-largest investor, with a total of 12 million shares – worth about $3.9 billion – in the cryptocurrency exchange in a Series A funding round. Other major players who participated were Tiger Global, Institutional Venture Partners, AH Equity Partners and DFJ Growth.
In addition, insider reports suggest that a number of early stage investors and Coinbase’s management sold billions of shares shortly after the company’s initial public offering. For example, Coinbase CFO Alesia Haas sold about 255,500 shares at $388.73 per share and retained some options. Also, Brian Armstrong, the current CEO of the platform, sold 749,999 shares in three transactions at different prices, earning him about $291 million.
But while the video initially appears to show an image of several Coinbase executives selling the majority of their shares in the company for a net profit, a Coinbase spokesperson told Cointelegraph that the sellers still have a strong ownership position.
What does the future hold for COIN?
According to independent investment research firm CFRA, Coinbase’s share price could rise by more than 20% in the near future, largely due to the accelerated adoption of crypto around the world and the entry of more institutional players into this emerging space.
Similarly, a group of CFRA analysts led by Chris Kuiper said in a recent note to the company’s clients that the price of COIN could stabilize around $400 over the next 12 months. Not only that, but the research firm gave its clients the green light to buy Coinbase stock and even gave the stock a Buy rating.
Kuiper and his team believe investors could earn up to $6.89 per share in 2021 and $3.00 per share in 2022, seeing operating margin growth that could eventually stabilize around 35%. Our base case scenario assumes that COIN will not only become one of the largest financial exchanges for cryptocurrencies, but will also successfully diversify into other products and services, including those for institutional investors, he added.
CFRA analysts have outlined three possible scenarios for Coinbase. First, they think COIN could face downward momentum in the coming months, which could push the stock down to $120. The second scenario is that the stock reaches $400 and stabilizes in that range. In the third case, the price of the stock rises to $840.
Almost a week after Coinbase was listed, a spokesperson announced that Nasdaq would list Coinbase starting on the 20th. April began trading options on Coinbase Global – COIN.O. The introduction of stock options will give investors another way to bet on the future of Coinbase. Simply put, stock options represent the right, but not the obligation, to buy or sell shares at a specified price, called the exercise price, on or before the expiration date.
The cryptocurrency market is shrinking in
After Coinbase Global Inc. went public, the cryptocurrency market went into a tailspin. The value of bitcoin fell 15 percent from $64,000 to $51,000 in the days after listing, but not for long. Similar declines were observed everywhere: Ether (ETH), Binance Coin (BNB), XRP and Cardano (ADA) also saw serious negative price action.
Moreover, in the above development, the total market capitalization of the cryptocurrency sector decreased from $2.37 trillion to $1.87 trillion, resulting in an increase of only about $2 trillion. In retrospect, it was inevitable. The markets are too excited about the immediate listing of the $Coin. Foundations are inflated, coins like $BSV, $XRP and $DOGE are inflated, Galaxy Digital founder Michael Novogratz tweeted recently.
Moreover, SkyBridge founder Anthony Scaramucci said after the listing that he was surprised that banks hadn’t paid much attention to Coinbase’s debut, suggesting that traditional institutions have yet to understand the immensity of the crypto financial revolution currently sweeping the world.
It now remains to be seen whether other cryptocurrency exchanges will follow in Coinbase’s footsteps and go public in the near future, which will greatly boost traditional investors’ confidence in this still-developing space.
In a similar vein, digital asset trading platform Kraken recently announced that while it doesn’t know when it will go public, it will pursue a direct listing rather than a specific acquirer, as Israeli brokerage platform eToro recently did.
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