April 16, 2021
Startup Coinbase, a secure exchange platform that helps people purchase, sell and store cryptocurrencies, has become the first such startup to go public. Shares traded at $381 each, up 52 percent from a reference price of $250, and eventually closed at $328.28, for a company valuation of $85.7 billion, ten times higher than its last private valuation. The San Francisco-based company’s IPO is a landmark for long-time crypto advocates. In its wake, Bitcoin’s value soared to $64,829 and Ether traded at a record-high of $2,487 (which also followed news about upgrades to the Ethereum network).
The New York Times reports that, at Tusk Venture Partners, which backed Coinbase, venture capital investor Bradley Tusk noted that, “any industry that can launch an IPO of this size is without a doubt a real thing, and it’s proven by the market.” Investors “who may be wary of directly buying risky digital currencies” can now “own stock in a Securities and Exchange Commission-approved business that facilitates the transactions” and get a peek into its “healthy profits.”
Coinbase, which has 1,700 employees and 56 million registered users, estimated it made $730 million to $800 million in net profits in Q1 2021. Future\Perfect Ventures founder Jalak Jobanputra said, “it blows a lot of the traditional tech and finance companies out of the water.”
However, notes NYT, it also “raises a question about the future of digital currency.” Coinbase and cryptocurrency advocates promote the idea of a decentralized financial system via blockchain technology, “but so far, cryptocurrency is mostly a vehicle for financial speculation and trading … [with] few people want[ing] to use Bitcoin for everyday purchases.”
Cryptocurrency is also not eco-friendly, using “a tremendous amount of computing power and electricity.” But the question, as vocalized by Tusk is: “Can it be anything more than an asset class?” “That’s still very much up in the air,” he opined.
The Wall Street Journal reports that the IPO has boosted the profiles of many cryptocurrencies. “Everything is rallying,” said LMAX Digital currency strategist Joel Kruger. “We have a combination of global macro forces that are driving risk higher.” CoinShares head of research Chris Bendiksen reported that, “flows into Bitcoin by institutional investors slowed during the past two months,” with one reason possibly being that “firms have been waiting to buy shares of Coinbase.”
Business Insider reports that Blockchain tech company ConsenSys raised $65 million from JPMorgan, UBS and other investors to help Ethereum upgrade its network, which could include “one that will start to burn coins, which some analysts have said could lead to sharp price rises for Ether.” It outperformed Bitcoin in 2021, “with a gain of more than 220 percent” as of this week.
Ethereum also permits applications to be built on top of it, including “non-fungible tokens or NFTs and decentralized finance.” Investor Mark Cuban said he thinks “the applications leveraging smart contracts and extensions on Ethereum will dwarf Bitcoin.”
Brian Armstrong, Coinbase’s CEO, Is Now One of the Richest People on Earth, CNN, 4/14/21
Coinbase Rival Binance Coin and Dogecoin Are Surging Ahead of Pivotal IPO… Here’s Why, MarketWatch, 4/14/21
Robinhood Resolves Issues with Crypto Trading Amid Dogecoin Rally, CoinDesk, 4/16/21
Massachusetts Seeks Revocation of Robinhood’s Registration, The Wall Street Journal, 4/15/21