Coinbase Files for IPO as Bitcoin Hits New Highs
Coinbase has been brewing an IPO since the summer, can this be the hottest one of 2021?
Kids who used bitcoin to buy alcohol in college and forgot about their wallet balance are jumping for joy, as bitcoin just breached past 23k and is looking to push past for more. For us plebs who play common stock, we have a glimmer of opportunity as Coinbase is looking to go public.
- Coinbase, THE spot to buy and sell cryptocurrencies recently filed an S-1 to go public. They are the largest digital currency exchange in the US.
- Bitcoin has attracted much attention from investors lately, and Paul Tudor Jones and Stanley Druckenmiller are among those who have come out in favor of the cryptocurrency. Big financial companies like Paypal and Fidelity have also been dipping their feet in the pool. Both are allowing exchanges in crypto. Citibank set a price target of $318,000 on bitcoin. Guggenheim set one at $400,000.
- Valued at around $8 billion, this will be one of the hottest IPO's of 2021. I don't think this is like an Airbnb/DoorDash money grab.
The company’s influence covers all the tracks of the cryptocurrency industry. It is a major hub for retail bitcoin trading and a gateway for alternative cryptocurrencies. Its institutional business is growing fast, doing $1b+ in revenue. It has an analytics team, a stablecoin in partnership with Circle, a ventures wing and a commerce department.
This past summer, reuters reported that Coinbase was indeed plotting to go public. At the time, they were flirting with investment banks and law firms, but it was all fluff until they could bring it to the attention of the SEC. Many cryptocurrencies have struggled to win legitimacy among mainstream investors and a general public wary of their speculative nature and potential for money laundering. The SEC allowing Coinbase to go public would be a major win for cryptocurrencies and the stock market.
Coinbase is seen as a safer exchange because it has never gotten hacked, unlike many of its competitors. Coinbase has also relentlessly pursued compliance with existing regulations and law enforcement, putting it on the right side of the law — another huge asset in a sector that is still in desperate need of regulatory guidance. They want the goody two shoes.
How it started
Crypto-guru Marc Andreesen (co-founder of Mosaic and Netscape) joined the board back in August, and the company brokered a deal for MicroStrategy (led by Michael Saylor) to purchase hundreds of millions of dollars worth of bitcoin earlier this year, which may have helped kickstart the bull run that’s picked up steam over the past year.
How it's going
It's valued at around $8 billion, with CEO Brian Armstrong owning $1.3 billion worth of bitcoin. Most recently, Armstrong was warning investors about the risks in bitcoin. Personally, I admire someone who tells you to not be an idiot, but maybe that's because Wallstreet Bets always encourages moronic behavior.
“We likewise caution investors who may be focusing on short-term speculation and encourage customers to seek out resources and consult financial advisers to better understand the risks associated with investing in cryptocurrencies,” Armstrong said.
Coinbase makes the majority of its money on fees it earns when people buy and sell Bitcoin on its trading platforms. The company, which also on Thursday filed IPO paperwork, confirming recent rumors about its plans to go public, has broadened its product offerings to cater to more professional Wall Street types in recent years.
Armstrong has urged exercising caution before. During Bitcoin’s last run-up in 2017, he mentioned on Forbes that we're "probably" in a bubble. While Armstrong’s latest commentary seems more positive (and without that scary "bubble" word), the implication remains that the present mania could pop. In 2017 when Armstrong made his comments, the market value of all cryptocurrencies, as measured by CoinMarketCap, a blockchain analytics tracker, exceeded half-a-trillion dollars. Today, after a year marked by the economic slashes of the Kung Flu, the embryonic industry’s total market value has exploded above $670 billion as of press time.
Industry observers have noted that the latest bull run is different from the last time around as more big-time investors and corporations are getting behind so-called digital gold as a legitimate investment. Fintech pioneer Square, tech firm Microstrategy, and life insurer Mass Mutual are among the companies that have bought up Bitcoin—and that’s just the tip of the iceberg for the many hedge fund and asset managers Bitcoin has won over.
Keep Coinbase on watch as the story unravels.
**Not a financial advisor. Articles are opinion only.
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