In some ways, the Coinbase exchange is the poster child for the crypto industry. It has embraced – not contested – regulations that set it apart from most cryptocurrency exchanges, while praising the company’s trading app for its ease of use. When JPMorgan Chase decided to expand traditional banking services to crypto companies in the United States earlier this year – a move that sets a precedent – it started with Coinbase and Gemini, another registered US exchange.
That’s why last week’s report that Coinbase filed a draft filing for an IPO with the U.S. Securities and Exchange Commission wasn’t much of a surprise, but it’s big news nonetheless – and not just because research firm Messari is the 35 million client company could be estimated at $ 28 billion.
“It’s a huge event,” Vladimir Vishnevskiy, director and co-founder of Swiss asset management company St. Gotthard Fund Management AG, told Cointelegraph, and not only in the US but also in Europe, because “the IPO will be a marker in terms of how markets are willing to value such companies. ”
Stephen McKeon, professor of finance at the University of Oregon and partner at Collab + Currency, told Cointelegraph, “Coinbase will represent the first crypto-native company to be listed on a major US exchange,” and as such its IPO “will be a significant event. for the industry ”- assuming, of course, that the offer goes as planned.
Meanwhile, Edward Moya, a senior market analyst at forex trading company Oanda, told Cointelegraph, “It looks perfectly timed after the strong breakthroughs with mainstream Bitcoin adoption, high demand for cryptocurrencies and growing institutional interest.”
That said, Coinbase, like other so-called unicorns, will now undergo “a lot of scrutiny,” Moya added, simply because the IPO market has become so popular in recent times. Some even call the market “Tech Bubble 2.0And make comparisons with the crazy lists of internet companies during the dot.com bubble of the late 1990s.
“There is a lot of money in the markets right now,” Vishnevskiy confirmed, and given the strong interest in IPOs, he expected the offer to be oversubscribed. According to McKeon, the premiums on the Grayscale and Bitwise funds suggest that there is a huge need for exposure to crypto within the stock markets, which should encourage a warm reception of Coinbase shares. He added:
“IPO activity is cyclical, it fluctuates between warm and cold markets. We are currently in the middle of one of the most popular IPO markets in recent years. Coupled with Bitcoin at an all-time high, this makes a very convenient time for Coinbase to go public. “
Due to Covid-19-related stimulus efforts, the global economy has been inundated with liquidity, with not many places to invest. Bond yields are close to zero. In this environment, public demand for equity stakes in innovative high-growth technology companies such as Coinbase is strong.
Concerns about service interruptions
Is there anything that could derail the process? “If there is some unforeseen circumstance, such as widespread media coverage of a new (or mutated) contagion, it could make market observers very risk-averse, making them less likely to put their money into an IPO,” Charles Bovaird, vice president of content at Quantum Economics, told Cointelegraph.
In addition, Coinbase has repeatedly declined during periods of high demand, as Bovaird recalled. In 2017, when the SEC issued the Winklevoss’ Bitcoin (BTC) exchange-traded funds and BTC prices subsequently plunged, many investors, including Bovaird, were unable to trade through Coinbase. That could play a role in investor assessment during an IPO, as capacity issues still held back the stock market in 2020.
Additionally, “Coinbase has a public image problem that they need to clean up and that may not be easy to do,” added Moya. The New York Times reported in November that some of Coinbase’s black employees raised concerns about discriminatory treatment, and in 2020 the employees were also “discouraged by debating business or politics internally and by tackling activist causes at work ”- all of which can yield benefits leadership problems in the minds of potential investors. Moya said to Cointelegraph:
“Next year, companies will need to embrace diversity and inclusion and until Coinbase can do that, they may miss out on taking full advantage of this opportunity.”
Vishnevskiy disagreed that Coinbase had an image issue and said the company would be seen as one of the “safer crypto games” if the IPO continues. “Interest from Europe is likely to be more muted than in the US,” which is the norm given the more conservative investment trends of European investors. “Nevertheless, I can confirm that I already know a few family offices in Europe who are interested in getting an assignment,” he told Cointelgraph.
Bovaird added that as an investor, he would not care about human resources policy or whether employees are allowed to hold political talks. “I really care if I can’t use their site to buy (or sell) Bitcoin when I want to.” But even if institutional investors actually prefer a “laser-focusedCEO like Brian Armstrong of Coinbase, private investors who have been a big player factor in the current IPO “frenzy”, might think otherwise.
Bringing in newcomers
Would a publicly held Coinbase bring more users to the cryptoverse? “This could boost crypto adoption,” said John Griffin, who holds the James A. Elkin’s centennial chair in finance at the University of Texas, to Cointelegraph, as companies surviving the IPO process – with months of scrutiny by regulators, analysts. and institutional investors – often come out fiercely and are a safer investment, at least in the minds of some investors. In comparison, “Look at WeWork,” suggested Griffin, “it couldn’t survive the scrutiny of a public listing and was crumbling.”
Digital assets, as well as IPOs, performed at near record levels in 2020 and “this event could bring to the space some entrants who previously focused solely on IPOs,” Vishnevskiy said. According to McKeon, the risk appetite for both areas is very similar, adding, “An IPO of Coinbase would further validate the cryptocurrency asset class to the general public, likely leading to further adoption.” However, a successful IPO of Coinbase should not be expected to solve all problems in the industry. As Griffin said to Cointelegraph:
“This is definitely a step towards legitimizing crypto and going mainstream. A big problem is that while exchanges like Coinbase are under the scrutiny of the regulatory bodies, [other] Exchanges that push up prices may be little researched. This means that the market is still open to manipulation. “
Overall, however, most observers saw a Coinbase IPO as a signal achievement for the cryptocurrency and blockchain industry. Failure of other crypto-native listings such as Bitmain and BitConnect, as well as Ripple’s, is remembered long awaited but still unseen IPO. “Some have failed for notorious reasons, others for tough US regulations,” said Moya, adding that anything that drives interest in crypto is a welcome development for the industry.
The IPO is a significant event, and according to Griffin, “shows that Coinbase’s path to operating within the regulatory process is economically profitable.” Meanwhile, John Sedunov, associate professor of finance at Villanova University, told Cointelegraph:
“An IPO of Coinbase would signal a further move into the mainstream for cryptocurrency. I don’t think this will push it across the finish line, but it will help continue the process of making cryptocurrency more accessible to investors and potential users. “