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NEW YORK: The arrival of cryptocurrency exchange Coinbase on Nasdaq today is one of the most anticipated events of the year on Wall Street, where enthusiasm for record-breaking bitcoin is in full swing, despite questions about the sustainability of the market.
The first company devoted entirely to cryptocurrency to enter the US stock exchange, Coinbase – which will be listed under the symbol COIN – is already a heavyweight.
Estimates vary depending on the method of calculation, but its capitalization is expected to range from US$70 (RM289 billion) to US$100 billion, the largest IPO for a US company since Facebook in 2012.
Coinbase chose a direct listing, which does not allow it to raise new funds but does offer current shareholders – founders, employees and historical investors – the opportunity to sell their stocks on the market.
Spotify, Slack, Palantir and Roblox had also used this method for their Wall Street debuts.
Nearly 115 million Coinbase shares will be put on the market.
Founded in 2012 in San Francisco by Brian Armstrong and Fred Ehrsam, the platform allows users to buy and sell about 50 cryptocurrencies, including bitcoin and ether.
Coinbase claims 56 million total users and a little more than six million people making transactions each month, according to estimates from its first-quarter results, released in early April.
The company has benefited from bitcoin’s meteoric rise over the past year, with the crypto asset’s price rising from US$6,500 last April to a record-high above US$62,000 yesterday.
“With bitcoin already having more than doubled in the last six months and cryptocurrencies becoming more popular with more mainstream investors, it can certainly be argued that crypto has become more mainstream in the last 12 months,“ said Michael Hewson, the chief market analyst at CMC Markets UK.
The success of Coinbase and cryptocurrencies in general has given some rivals ideas: the head of the California-based cryptocurrency exchange platform Kraken told CNBC last week he hopes to take his company public next year, also via a direct listing.
If the situation seems favorable to Coinbase, caution remains the order of the day among observers, who recall the company’s dependence on the price of virtual currencies, which tend to be volatile.
Before its spectacular rise in recent months, bitcoin had experienced setbacks, particularly in 2018 when the currency kept falling.
Some are also drawing attention to the distrust of lawmakers in several countries who are concerned about cryptocurrencies being used for illicit purposes.
“Will Coinbase prove popular with retail investors? There is little doubt about that prospect with demand and interest set to be high,“ said Hewson.
“The bigger question is whether any valuation is sustainable, particularly given how many governments aren’t particularly enamoured of cryptocurrencies,“ he said.
“Future regulation is likely to be a clear and present danger and a probable headwind” in the long term. – AFP
