Coinbase set to go Ker-ching

With the growing popularity of crypto currencies attention has inevitably shifted towards the exchanges that they trade on, and the upcoming direct listing of Coinbase is something that investors have been looking forward to for a while.

The listing was initially scheduled for March, however Coinbase fell foul of the SEC as well as reaching a $6.5m settlement with the CFTC over claims it was reporting false information over its transactions.

No new shares will be issued with shares made available from existing investors, looking to cash in some of their seed stakes, and take some profits, with the company estimated to have a value in the region of $80bn.   

In its most recent quarterly update Coinbase announced that it expects to make between $730m to $800m in Q1. The company has 56m verified users and its latest results showed the company turned over $1.8bn in the first three months of its fiscal year.

This is more than the company generated over the whole of 2020, when it generated revenue of $1.3bn. In terms of trading volumes, the last quarter saw turnover of $335bn, with assets on its platform rising to $223bn, with $122bn from what they called “institutional” users. Perhaps surprisingly Coinbase didn’t provide any guidance citing the “inherent unpredictability” of its business.

The company did outline three separate scenarios for the year, with the most optimistic predicting around 7m monthly users, which is slightly higher from its current 6.1m monthly transacting users. As a result of the direct listing the company expects to incur expenses of $35m in Q2.

With bitcoin already having more than doubled in the last six months and crypto currencies becoming more popular with more mainstream investors it can certainly be argued that crypto has become more mainstream in the last 12 months.

From the likes of Tesla CEO Elon Musk buying some bitcoin to saying that customers can pay for a Tesla with bitcoin, we’ve also seen the likes of Morgan Stanley offering access to crypto markets to its wealthier clients.  

It’s not just Bitcoin that is proving popular however, there are also a whole host of other crypto currencies that are becoming more tradeable with the likes of Ethereum, Litecoin and Stellar Lumens hitting record highs this month, in the process helping to push the CMC All Crypto Index to new record highs as well.

Will Coinbase prove popular with retail investors? There is little doubt about that prospect with demand and interest set to be high. The bigger question is whether any valuation is sustainable, particularly given how many governments aren’t particularly enamoured of crypto currencies, which means future regulation is likely to be a clear and present danger and a probable headwind.

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