Coinbase, an American cryptocurrency exchange platform, will today April 14, 2021 be listed on the Nasdaq exchange, making it the first major cryptocurrency to go public in the United States, a milestone that has generated a buzz across the entire cryptocurrency.
When the nine-year-old start-up lists on the Nasdaq exchange on Wednesday, it will become the first major cryptocurrency company to go public in the US, a milestone that has generated excitement in an already buoyant market for digital assets.
The challenge is that few people know how to value the company, which counts on volatile transactional revenues in lightly regulated markets for the vast majority of its business.
“It’s a bit of a Rorschach test for people’s belief in crypto,” said Tom Loverro, a partner at IVP, which valued the company at $1.6bn when it first invested in 2017. Coinbase operates the largest US cryptocurrency exchange and held funds for 56m retail customers at the end of the first quarter, capitalising on the demand for an easy-to-use storage solution in the early days of bitcoin.
The company’s listing comes during a bull run in the price of cryptocurrencies, with bitcoin more than doubling since January to cross the $60,000 barrier. Investors have also flocked to new technologies, bidding up electric vehicle companies and speculative assets such as non-fungible tokens, or NFTs.
The heady combination could create volatility in Coinbase’s shares, even though the company has opted for a direct listing, an alternative to initial public offerings that usually produces modest price changes on the first day of trading. On private exchanges, shares in Coinbase have traded at prices of between $200 and $375 this year, according to the company’s prospectus.
At the top end of that range, Coinbase would have a market capitalisation of almost $74bn, making it more valuable than the parent company of the New York Stock Exchange. Coinbase’s valuation would be roughly $100bn when including options and other kinds of stock-based awards. Such a valuation would be a rich reward for Coinbase, which private investors previously valued at $8bn in 2018.
It would also cement the company’s co-founders, Brian Armstrong and Fred Ehrsam, as multibillionaires, while providing lucrative returns to early investors such as Andreessen Horowitz and Union Square Ventures. Coinbase has grown into the largest US cryptocurrency company by hewing closely to regulators and maintaining a secure service, avoiding the stumbles that have dogged other trading venues.
The company estimated it oversees about 11 per cent of the total cryptocurrency market, with $90bn in assets at the end of last year. Active cryptocurrency users have said that Coinbase takes advantage of its status as a trusted intermediary, charging high fees for basic functions such as holding and trading digital assets. Coinbase takes an average cut of more than 50 basis points per transaction, according to an analysis of the company’s prospectus.
“The question for consumers, and ultimately for institutions, is how much are you willing to pay to safeguard your assets,” Loverro said. “People generally act rationally, and there’s a reason people pay what appears to be a premium to use Coinbase.” Because of the nature of cryptocurrency markets, Coinbase also has few parallels in traditional finance.
It acts as a broker, such as Charles Schwab; holds assets in custody for large clients, similar to State Street; operates an exchange; and sometimes acts as a market maker. Cryptocurrency investors said Coinbase does not usually provide the best liquidity, or trading prices, and its advantage instead rests in the value of its customer accounts.
“We tend to think of Coinbase as an exchange, because they have an order book, but it is not the most important feature,” said Max Boonen, founder of the market maker B2C2. Coinbase dominates an oligopoly of US-based exchanges because of its close relationship to regulators, high trading volumes and relatively secure reputation, said Carol Alexander, a professor of finance at the University of Sussex, who has studied cryptocurrency markets. “Coinbase is certainly leading,” Alexander said.
“As they expand the coins they can offer, that makes it more difficult for the other exchanges to catch up.” The company’s stature also means its finances have closely followed the swings of bitcoin and other cryptocurrencies.
Goldman Sachs Executive Quits After Making Millions From Dogecoin
A senior manager at Goldman Sachs in London has quit the US investment bank after making millions from investing in Dogecoin, the joke crypto asset which has risen by more than 1,000 percent in value this year.
City sources said Aziz McMahon, a managing director and head of emerging market sales, had resigned from the bank after making money from investing in the digital currency based on the Doge internet meme.
Backed by famous supporters including the Tesla founder, Elon Musk, the rapper Snoop Dogg and the Kiss bassist Gene Simmons, the digital asset similar to bitcoin has soared in value over recent months.
Based on an internet meme – a humorous online phrase or photo, on this occasion a dog called Doge – the cryptocurrency rose above $0.72 against the dollar last week in anticipation of Musk’s appearance on the hit US TV show Saturday Night Live.
It has plunged by more than 30 percent this week since Musk’s appearance to about $0.50, according to Coindesk. However, it is still up by more than 1,000 percent from the start of 2021.
Little is known about how much money McMahon made exactly from betting on Dogecoin, after his departure was first reported by the website efinancialcareers. The banker, who has worked for Goldman Sachs for 14 years, did not respond to requests for comment. However, sources said they believed it was a substantial sum and that he had since left Goldman Sachs.
It is believed Aziz made the money investing on his own personal account and was not involved in trading cryptocurrencies for Goldman Sachs.
Created in 2013 by two software engineers from IBM and Adobe, the Dogecoin digital currency started as a joke parodying bitcoin. It has however rocketed in value amid a wave of speculative investment in crypto assets, fuelled by a buzz online and an aim to perpetuate the joke by pumping up its value.
What’s REALLY Behind Musk’s Bitcoin U-turn?
Elon Musk’s sudden u-turn regarding Bitcoin on Twitter – which sent prices plummeting by 15% – could be more of a PR stunt than anything else, says the CEO of one of the world’s largest independent financial and fintech organisations.
The observation from Nigel Green, deVere Group’s chief executive, comes as the Tesla billionaire boss said the company will halt sales of cars using Bitcoin due to the environmental impact of mining that cryptocurrency.
Mr Green comments: “Musk is once again flexing his influencer muscles on social media. In a somewhat Trumpian move, he’s taken to Twitter to announce a major u-turn.
“Just a few months ago, to much fanfare, Musk announced that his company Tesla had bought $1.5 billion worth of Bitcoin and that it would accept it as payment for cars. The move was one of the reasons the cryptocurrency’s price has soared this year.”
He continues: “All of a sudden, he’s not so keen due to environmental concerns. But why now? Those issues surrounding the environmental impact have not come up in the last few months? Did Musk seriously not know about them before he bought $1.5 billion Bitcoin?
“There are serious and important environmental matters which urgently need to be addressed about Bitcoin mining. Any action to support the further transition to fully using sustainable energy must be championed – it is something I whole-heartedly support.
“According to research 76% of cryptocurrency miners currently use electricity from renewable energy sources as part of their energy mix. Which begs the question: why, with all his immense resources and power is Musk not able to ensure that all his Bitcoin is mined this way?
“In addition, why is he not using this influence to further advance and incentivise renewable energy for cryptocurrencies – something that Twitter founder Jack Dorsey has previously tweeted about and with which Musk agreed on the social platform.”
Could there also be another driver behind the Bitcoin move?
“Musk likes being known as being a contrarian. He likes to go against the crowd in a high-profile way. Is his waning interest in Bitcoin at a time when huge amounts of institutional investment from major Wall Street banks is pouring in, part of this?” asks Mr Green.
With the fundamentals of Bitcoin – the very ones that are attracting enormous institutional and retail interest remaining unchanged – many investors are likely to use this current price drop from recent all-time highs as an important buying opportunity.
Previously the deVere CEO observed that inherent traits of cryptocurrencies are ever-more attractive. “These characteristics include that they’re borderless, making them perfectly suited to a globalised world of commerce, trade, and people; that they are digital, making them an ideal match to the increasing digitalisation of our world; and that demographics are on the side of cryptocurrencies as younger people are more likely to embrace them than older generations.”
Mr Green concludes: “Clearly, Musk still believes in Bitcoin – he didn’t sell any – and I now hope he will use not just words but his immense resources to further expediate the transition to sustainable energy for crypto mining.”
Tesla to Announce Dogecoin as Bitcoin Replacement
Following the decision to stop accepting Bitcoin for vehicle payment, Tesla Inc. may announce Dogecoin as a replacement for Bitcoin.
On Wednesday, Elon Musk, the Chief Executive Officer, Tesla Inc, said the company is looking at cryptocurrencies that use less than 1 percent of Bitcoin’s energy for transactions.
This was two days after Musk, in a poll, asked if his over 54 million followers, want Tesla to accept Dogecoin, a meme coin he has aggressively promoted to the mainstream.
The billionaire said “Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment.
“Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.”
Millions of Dogecoin traders and investors have started projecting that the Doge Father will announce Dogecoin as a Bitcoin replacement going by his tweet and the poll.
Do you want Tesla to accept Doge?
— Elon Musk (@elonmusk) May 11, 2021
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