LONDON (Reuters) – Coinbase Global Inc, the largest US cryptocurrency exchange, will list on the Nasdaq Wednesday, marking a milestone in virtual currencies’ journey from niche technology to mainstream assets.
The listing is by far the largest to date from any cryptocurrency firm, with the San Francisco-based firm saying last month that private market transactions had valued the company at around $ 68 billion this year, up from $ 5.8 billion in September.
It represents the latest breakthrough for cryptocurrency adoption, an asset class that was shunned by mainstream finance just a few years ago, according to interviews with investors, analysts and executives.
“The listing is important because it marks the growth of the industry and its adoption in mainstream business,” said William Cong, an associate professor of finance at Cornell University’s SC Johnson College of Business.
Bitcoin, the largest cryptocurrency, hit an all-time high of more than $ 63,000 on Tuesday. It has more than doubled this year as major investors, banks from Goldman Sachs to Morgan Stanley and well-known companies such as Tesla Inc are warm to the emerging assets.
Coinbase’s direct listing – meaning it has not sold any stock prior to its market debut – is likely to accelerate that process, Reuters interviewees said, by raising awareness of digital assets among investors.
“This in itself is a very positive thing for bitcoin as it proves the bridge built from an esoteric cowboy arena to mainstream finance,” said Charles Hayter of data company CryptoCompare.
Still, some institutional investors have expressed caution about the long-term outlook for Coinbase and the crypto sector.
Swiss asset manager Unigestion said it was wary of the hype surrounding cryptocurrencies and would not buy Coinbase shares as a result.
“We think there is a lot of madness and exuberance in everything that resembles crypto,” said Olivier Marciot, a portfolio manager at Unigestion, which oversees assets worth $ 22.6 billion.
“Hedge funds and retail will likely be the early risers in these new stocks – which they will likely buy quite heavily – which should not be a clear indication of how they will be in the longer term.”
HELD BY BITCOIN?
Other experts said the risks included Coinbase’s exposure to a highly volatile asset that is still subject to patchy regulation.
Founded in 2012, Coinbase has 56 million users worldwide and an estimated $ 223 billion in assets on its platform, accounting for 11.3% cryptocurrency market share, according to regulatory documents.
The company’s most recent financial results underscore how revenues have increased in conjunction with the rise in bitcoin trading volumes and price.
In the first quarter of the year, when the price of bitcoin more than doubled, Coinbase estimated revenue of more than $ 1.8 billion and net profit between $ 730 million and $ 800 million, versus revenue of $ 1.3 billion for the whole of 2020.
“The correlation with bitcoin will be very high after the stock stabilizes after listing,” said Larry Cermak, research director at crypto website The Block.
“When the price of bitcoin falls, it is inevitable that Coinbase’s earnings and the inherent price of the stock will also fall.”
Regulatory risks also loom, others said, as Coinbase increases the number of digital assets that users can trade on its platform.
Coinbase suspended trading in the major digital currency XRP last year after US regulators charged related blockchain firm Ripple with an unregistered $ 1.3 billion securities offering. Ripple has denied the allegations.
“Given the expansion of the assets covered by Coinbase, it is almost inevitable that other offerings will be at stake,” said Colin Platt, chief operating officer of crypto platform Unifty.
Coinbase declined to comment.
Reporting by Tom Wilson and Anna Irrera Edit by Nick Zieminski