Coinbase made it into history Tuesday when it became the first notable crypto player to go public, with an eye-popping $100 billion valuation that moves the digital currency market closer to the mainstream.
The San Francisco-based exchange’s direct listing on the Nasdaq is being viewed as a test run with the potential to add a new layer of legitimacy to digital currency. In the past year, cryptocurrency has been adopted by such brands as Tesla and Square. In contrast, Wall Street giants such as Goldman Sachs and Morgan Stanley have taken steps toward offering bitcoin and other digital assets to investors, CNBC has announced.
Nasdaq granted Coinbase — which trades under the ticker “COIN” — a reference price of $250. MarketWatch claimed it opened at $381 on Wednesday afternoon and quickly surged above $420 per share.
“Coinbase is not just any crypto play, they’re one of the linchpins to the global crypto ecosystem,” stated Dan Ives, managing director of equity research at Wedbush Securities.
“Ultimately, how the Coinbase IPO and reception plays out is important for many other companies that are potentially following on the crypto front. It’s more than just Coinbase.”
Though interest in virtual currencies has skyrocketed — the market has doubled since January and smashed past $2 trillion this week — the landscape is peppered with risk. Cryptocurrency is well known to be volatile, and lawmakers have displayed an urgent need for regulation to combat criminal activity. In 2020, global “darknet” markets brought in a record $1.7 billion in crypto revenue, according to ChainAnalysis.
Bitcoin has claimed the headlines, but other digital currencies have soared, too: Ethereum, the second-largest cryptocurrency by market capitalization, is up 221 percent year-to-date, according to Coindesk. Dogecoin, a meme-based currency created as a joke, is up more than 2,700 percent to 13 cents a share. Tesla CEO Elon Musk has used his Twitter account to become Dogecoin’s biggest cheerleader — potentially putting himself back in the SEC’s crosshairs in the process.
Since its creation in 2009, bitcoin has been riding primary boom and bust cycles, and many analysts believe another bubble burst is inevitable. In a research note last week, UBS Global Wealth Management warned clients that “empirical evidence” suggests greater participation among institutional investors could increase volatility “due to their more opportunistic investment approach,” Markets Insider reported.
Coinbase has registered more than 261 million shares for its listing. But the massive valuation is more a reflection of “flare and hyperbole” than substance, said David Trainer, chief executive of New Constructs. He notes that it was an $8 billion company just three years ago. To live up to a $100 billion valuation, Coinbase would have to eclipse the revenue of the biggest exchanges on the planet.
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