The Cryptocurrency gold rush is all set to enter Wall Street as soon as tomorrow, with Coinbase slated for its stock market debut. Even with its listing, Coinbase, one of the world’s most popular cryptocurrency trading platforms, is breaking away from the conventional pattern and going for a direct listing instead of the traditional initial public offering (IPO) route. Shares of the company will be listed on the bourses on April 14, under the ticker ‘COIN’. With this Coinbase will become the first such company to list on the bourses. Coinbase’s IPO comes on the back of strong demand in cryptocurrencies seen in 2020 and even so far this year.
What is Coinbase?
Started in 2012, Coinbase is how most cryptocurrency investors, retail or institutional, get their hands on assets such as Bitcoin, Dogecoin, or Ethereum, if they do not mine them. Coinbase, founded by former Airbnb engineer Brian Armstrong and an ex-Goldman Sachs trader Fred Ehrsam, provides its customers with a trading platform where they can buy or sell different types of cryptocurrencies. Coinbase has 43 million users now and 7,000 institutions use its platform for trading, according to the company’s SEC filing.
How does it earn revenue?
The company generates revenue by charging a fee on all the transactions made using its platform. This fee usually varies from region to region and from currency to currency. Coinbase is available for use in over 100 countries, including the United States of America, Canada, India, Italy, France, Luxembourg, and others. While users in some countries can avail all services offered, elsewhere only a limited number of features are available as of now.
However, Coinbase revenue is not just limited to the fee charged but also to various products that the company offers. The most talked-about product offered by the company is the Coinbase Card, powered by Visa. Using this, Coinbase customers can spend their cryptocurrency balance at any place that accepts Visa cards. Along with this, Coinbase earns revenue from its Pro platform and software services.
Sharp jump in profit, revenue
Ahead of its stock market debut, Coinbase informed that it will report a first-quarter profit in the range of $730 million to $800 million. This, according to Bloomberg, will be more than double what the company earned in the year 2020. Coinbase’s revenue for the previous financial year stood at $1.3 billion and it is expected to outperform that number in the first three months of this year.
$100 billion valuation?
With such financials and strong growth with 13,000 new customers being added in a day, the valuation of Coinbase is expected to skyrocket. Bloomberg said that backed by the crypto frenzy, Coinbase could list at a valuation of $100 billion. Ahead of its listing, Coinbase was valued at $90 billion on NASDAQ’s private market.
But, there are risks involved with Coinbase. The Motley Fool, a private financial and investing advice company based in Alexandria, Virginia, recently wrote that Coinbase is highly dependent on trading to drive platforms. They highlighted that 86% of Coinbase revenue was from transactional fees. This was in a year when cryptocurrencies have seen massive interest, which might fall in the years to come.